The Med Diva

An insider's guide to Medicare Part D and more

Archive for the tag “Monthly premium”

The Blind Leading the Blind: Anatomy of a Medicare Part D Monthly Premium

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At least once a week one of my coworkers on our Medicare Part D team will come to me with what they think is a simple job. ‘I just need you to write a short apology letter. It should be simple,” Karen will tell me. “I have a simple project for you. All you have to do is edit this web page for Medicare Open Enrollment,” Tina will say. “We just need to ‘Medicarize’ this brochure, so it will be simple,” Chris will state.

Inevitably, I always respond, “Nothing is simple with Medicare Part D.” And then as what appeared to be an easy project becomes more complex with each new logistical problem that arises, I say, “I told you so.”

One of the most complicated “parts” of Part D – and thankfully, one that I have absolutely nothing to deal with – is what we call the annual Medicare bidding process. As our director of actuarial services notes, the process of bidding on Medicare prescription drug plans is a lot like putting together a giant puzzle. When the puzzle is completed, you end up with a monthly Part D premium of $32.07 or $41.29 or some other odd amount that seems completely random.

Unlike the commercial insurance market where providers set the premiums for a plan, Medicare Part D premiums are determined as part of a blind bidding process that begins in June of each year. Every Part D provider submits bids to the Centers for Medicare & Medicaid Services (CMS) without knowing what the competitors will offer. Then CMS sets premiums based on how the bids average out. Premiums may vary from what providers submitted depending on what their competitors bid and how they differ from expectations.

A few large competitors dominate the marketplace, so the ability to predict premiums, profitability and potential membership growth requires an educated guess as to how other Part D providers will bid. The guesswork can be quite complex and requires a detailed understanding of trends and potential growth strategies in the marketplace.

For example, is a large Part D provider going to try to maximize profits by bidding a higher number or are they looking to increase membership and so plan on submitting a lower bid to CMS? Data and historical trends are helpful, but it’s really more of an art than a science when it comes to making a good bid that has competitive premiums and features that Medicare beneficiaries want in a Part D plan.

During the next two months, CMS will thoroughly review each bid. In August, CMS will release the bid results, giving marketing departments and employees like me just barely enough time to create all the plan materials and marketing communications for Medicare Open Enrollment in mid-October.

Study suggests most Medicare beneficiaries are paying too much for their Part D coverage

Seniors Pay Too Much for MedicareApproximately 20 percent of Medicare beneficiaries spend at least $500 more than they need to for their Medicare Part D prescription drug coverage, according to a new Health Affairs study released this week. That’s a lot of money being kept out of the piggy bank.

According to University of Pittsburgh researchers Chao Zhou and Yuting Zhang, only 5 percent of Medicare beneficiaries buying a Part D plan choose the plan that’s cheapest for them relative to their prescription drug needs. Based on their analysis of 2009 Part D data, the average beneficiary paid $368 more in premiums and drug costs than they would have if they’d chosen the least expensive plan that was right for them.

Zhou and Zhang attribute most of the overspending to seniors’ inclinations to pick Medicare plans with more generous features and lower deductibles, and thus, higher premiums. For example, they noted that the biggest mistake people make is picking a plan that covers generic drugs in the Coverage Gap (doughnut hole). Many beneficiaries appear to be paying hundreds of dollars more in premiums for this feature than they get back in drug benefits—perhaps because they don’t ask their doctors to prescribe generic drugs or they just never reach the Coverage Gap.

However, the researchers acknowledge there are also a few reasons why Part D beneficiaries may not want to choose the cheapest plan. Some seniors may choose a more expensive plan because it offers better customer service or has a higher Medicare star rating, or because they may be willing to spend a little more for peace of mind in case their medication needs unexpectantly increase.

So how do you find the lowest-cost Part D plan that’s also the best fit for you?

As I’ve said in the past, you should look for a plan that offers the lowest total cost based on the medications you take.  When shopping for a plan, remember to consider the monthly premium and annual deductible as well as the annual costs for all your medications. Fortunately, those good people at Medicare have a great online tool called the Medicare Plan Finder that makes it easy for you to compare costs each year. Here’s what you do:

1. Go to Medicare.gov and click on “Find health & drug plans.”  (You’ll see this in a yellow box near the top left of the page.)  

2. Enter your zip code, and then answer the other questions. Make sure you choose one or two pharmacies that are near you, and specify all the drugs you take (and their dosage). You’ll also need to say whether you get your prescriptions filled at a retail or mail-order pharmacy.  Answering these questions is the only way the tool will give you accurate cost information for your personal drug needs.

3. On the search results page, click on “Prescription drug plans (with original Medicare)” to see a complete list of stand-alone Part D plans available in your area. You can also refine your search on this page.

4. The generated list will show the lowest-cost plan first, which includes monthly premiums as well as out-of-pocket costs for the drugs you selected. And because a cheap plan with a low star rating may end up costing you more in the end (more time, more aggravation, more worry, etc.),  you should also sort results by Overall Plan Rating to make sure the lowest-cost choices have a good star rating (3.5 or more stars). 

Remember, Medicare Open Enrollment is October 15 through December 7, 2012.

Medicare Part D premiums not expected to rise in 2013

Today the Obama administration announced that the average premium for basic Medicare Part D drug coverage will stay the same next year, at around $30 a month. This makes three years in a row that the monthly Part D premium has stayed in the $30 range for Medicare beneficiaries.

Because we’re dealing with Medicare, there is, of course, a caveat. The $30 amount is just an average, so some beneficiaries may pay a higher premium amount in 2013, while others may pay less. That’s why it’s so crucial to check your plan during open enrollment season this fall (October 15 to December 7) and shop around if your costs go up too much or you’re just not satisfied with your plan.

Why it’s important to choose a plan with the lowest total cost

Although premiums are important, if you’re shopping around for a new Medicare Part D plan, you should look for a plan that offers the lowest total cost based on the medications you take. I really can’t stress this point enough.

All too often, Medicare beneficiaries will choose a plan with the lowest monthly premium, only to find out weeks or months later that they’re going pay more in the long run. It may be that the co-payments for their medications are higher in this “low-cost” plan, or they have a higher annual deductible. As I have mentioned before, remember to consider the monthly premium plus the annual costs for all your medications when making your decision.

 

Countdown to Medicare Part D Open Enrollment: Day 2

Open Enrollment for 2012 begins tomorrow, October 15,
and ends on Wednesday, December 7, 2011.

Day 2: The Medicare Part D Myth Buster–Why you should enroll when you first become eligible

If you’ve ever watched the show Mythbusters on the Discovery Channel, you know the hosts Adam Savage and Jamie Hyneman set out to prove–or bust–some of the craziest myths out there. Would a bull do damage in a china shop? Nope, in fact they’ll daintily and nimbly walk among the aisles of breakables. Can you teach an old dog new tricks? You sure can!

So here’s a big myth about Medicare Part D prescription plans that I’m going to dispel for you: “If I don’t use many drugs, or no drugs at all, it’s not worth it for me to enroll in a Medicare Part D plan and pay a monthly premium.”

Busted.  That’s like saying you’re not going to get auto insurance because you’ve never had an accident before.

Unless you have creditable prescription drug coverage through another plan (such as from your former employer or union, TRICARE, or Department of Veterans Affairs), it pays to enroll in a plan and pay the monthly premium.

Here are 3 reasons why you should enroll in a Part D plan when you first become eligible:
1. You can’t put a price on peace of mind
2. You can’t sign up for a plan mid-year
3. You will pay a late-enrollment penalty if you change your mind later

Although you may not use many or even any drugs right now, you never know what your drugs needs are going to be down the road. Sure, you may luck out and never have to take drugs for a chronic condition (such as asthma or diabetes), but what if you were in an accident or had a bad case of the flu and had to take a lot of drugs? Without Part D, you’ll be out of luck (or money). Do you really want to worry about that on top of everything else?

Still not convinced? Let’s say you become eligible for Medicare in February but decide not to join a plan because you don’t take any drugs. In June, you’re diagnosed with Lyme disease, so your doctor prescribes several expensive medications. A few months later you experience some complications and have to take a few more drugs. Some of these new-fangled drugs cost hundreds of dollars for people without insurance–why chance it?

The dreaded late-enrollment penalty
Are you starting to think twice about delaying enrollment now? If not, the late-enrollment penalty should be the deciding factor.
If you don’t enroll in a Part D plan when you first became eligible, or you go for 63 continuous days or more without creditable prescription drug coverage,* you will more than likely have to pay a monthly penalty if you join a Part D plan later.

If you must pay a late enrollment penalty:
• The penalty amount will be added to your premium invoice each month.
• You will be charged a penalty for as long as you have Part D coverage—it follows you everywhere, even if you switch plans.
• The penalty amount will change each year, based on the national base plan premium.

How to determine the amount of the penalty that you will pay:
• Count the number of full months you delayed joining a Part D plan after you were first eligible to enroll or the number of full months in which you did not have creditable prescription drug coverage for more than 63 days.
• The penalty is 1% for every month that you delayed or didn’t have creditable coverage.
• Multiply the penalty percentage (1% x number of months) and the national base plan premium (for 2012, the average is $31.08). Then round to the nearest 10 cents.
• For example, if you go 10 months without prescription drug coverage, you will have to pay an extra $3.11 each month in 2012 (1% x 10 x $31.08 rounded up).

In this example above, an extra $3.11 a month doesn’t really sound like much, but do you really want to pay more than everyone else for the same thing?

Tomorrow, the first day of Open Enrollment, I’ll review eligibility windows for enrollment and go over again how to avoid the late-enrollment penalty.

*Creditable prescription drug coverage is coverage that is at least as good as Medicare’s standard prescription drug coverage.

Countdown to Medicare Part D Open Enrollment: Day 11

 Open Enrollment for 2012 begins on Saturday, October 15, and ends on Wednesday, December 7, 2011.

Why it’s important to choose a plan with the lowest total cost

A few days ago, I suggested that if you’re shopping around for a new Medicare Part D plan, you should look for a plan that offers the lowest total cost based on the medications you take. I really can’t stress this point enough.

All too often, Medicare beneficiaries will choose a plan with the lowest monthly premium, only to find out weeks or months later that they’re going to end up paying more in the long run. It may be that the co-payments for their medications are higher in this “low-cost” plan, or they have a higher annual deductible. As I have mentioned before, remember to consider the monthly premium plus the annual costs for all your medications when making your decision.

Total prescription drug plan costs will vary by plan

As a member of a Part D plan, you will pay a monthly premium in addition to any premiums you pay for Medicare Parts A and B. You may also be responsible for paying some of your prescription drug costs in the form of co-payments or coinsurance. Keep in mind that your total drug plan costs will vary, depending on the following criteria: 

  • Amount of coverage your plan offers (for example, some plans offer full or partial coverage in the Coverage Gap, or “donut hole”)
  • Annual deductible amount
  • Your current Part D benefit stage (for example, Initial Coverage or Catastrophic stage)
  • Region where you live (monthly premiums vary by state)
  • Medications you use (generics usually cost less than brand-name medications)
  • Pharmacies you use (retail or mail; in-network or out-of-network)
  • Whether your drugs are covered on the plan’s formulary (list of covered drugs)
  •  Whether you qualify for Extra Help paying your Part D costs 

Coverage stages affect your drug costs

Drug costs vary throughout the year based on your current Part D benefit stage (or coverage stage). There are 4 standard Part D benefit stages as follows:

Stage 1: Deductible stage
• The amount you must pay out of pocket before the plan begins covering your drugs.
• The standard Medicare Part D deductible is $320 in 2012.
• Some plans may have no deductible at all; others may have a deductible only for certain drugs, such as brand-name drugs.

Stage 2: Initial Coverage stage
• This stage begins after you have met any deductible and continues until your total drug costs (the amount that both you and your plan pay) reach $2,930.
• During this stage, you will generally pay a portion of your drug costs and the plan will pay the rest. What you and your plan pay combined is what counts toward your total drug costs—and what moves you towards the Coverage Gap.

Stage 3: Coverage Gap stage (“Donut Hole”)
• This stage begins when your total drug costs exceed $2,930 and continues until your out-of-pocket costs reach $4,700. (Out-of-pocket costs do not include payments made by your plan.)
• During this stage, you get a 50% discount on brand-name drugs from manufacturers who have agreed to participate in the Coverage Gap Discount Program. 
• In this stage, you pay only 86% of the cost of generic drugs.

Stage 4: Catastrophic Coverage stage
• You will reach this stage after your out-of-pocket costs exceed $4,700.
• The standard co-payment in this stage is $2.60 for generic/preferred drugs and $6.50 for other drugs.

The following is an example of how Part D plan costs can vary, and why it’s so important to consider your total annual drug costs with each plan:*†

1. Plan with low premium and no extra coverage in the Coverage Gap
 
Monthly premium: $15.00 
Annual deductible: $320.00 
Monthly co-payments for drugs: $250.00 
Drug costs in the Coverage Gap: $450.00 
Total annual drug costs: $4,100

2. Plan with moderate premium and no extra coverage in the Coverage Gap 

Monthly premium: $25.00 
Annual deductible: $275.00
Monthly co-payments for drugs: $175.00
Drug costs in the Coverage Gap: $325.00
Total annual drug costs: $3,125.00

3. Plan with high premium and extra coverage in the Coverage Gap 

Monthly premium: $50.00 
Annual deductible: $150.00
Monthly co-payments for drugs:  $100.00 
Drug costs in the Coverage Gap: $100.00 
Total annual drug costs: $1,950

*Dollar amounts are samples for explanatory purpose only.
† Sample assumes 3 months in Coverage Gap stage.

The dollar amounts in the above examples are not taken from an actual plan; the example is meant only to demonstrate that it is possible for a plan with a high monthly premium to be less costly overall based on the deductible amount and drug costs.  If you are in a plan with a very low monthly premium right now, and you also take several medications on a regular basis, you may be missing a savings opportunity by not exercising your right to shop around for a plan that offers the best value for you.

 

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