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.