Question from Bonnie
Question from Bonnie: Can you explain the Four Stages of Medicare Part D? All I know is that my meds are very expensive at the beginning of the year, are affordable for a few months, and then get high again in the Summer. Can you explain why in a way I can understand?
Answer
Answer: The “Annual Deductible” is Stage 1. It only affects those who have Supplements and use Stand Alone Part D to help pay for prescription drugs. Almost all Stand Alone Part D plans have a $505 deductible on Tiers 3, 4, and 5 medications, which are generally brand name. This means that no portion of the cost of those Tier medications is covered until the insured has spent $505 out of their own pocket. Tier 1 and 2 drugs on the majority of Stand-Alone plans are not subject to the deductible and have co-pays between $0 and $5. Medicare Advantage HMOs and PPOs come with Part D embedded and there are no medications subject to deductible.
Number 2 is the “Initial Stage” and occurs once the deductible has been met for those on Stand Alone plans, and immediately at the start of the calendar year for those on Medicare Advantage. During Stage 2, most companies, both Stand Alone and Advantage, have set co-pays for Tier 3 drugs which range from $37 to $47 for a 30-day supply. I do have a warning for those on the least expensive and one of the most popular Stand-Alone Part D plans in both 2022 and 2023. This plan made a significant change for the upcoming year. Instead of a Tier 3 Medication having a flat co-pay of $46, they are now 25% of the full cost, a huge difference when you consider brand name medications generally retail between $500 and $1,000 for a 30-day supply. One of the biggest mistakes made by those on Supplements is assuming because their Stand-Alone Part D premium had little or no change, it doesn’t need reviewed. As far as prescriptions are concerned, Medicare Advantage Plans have always been very consistent. There have never been deductibles on drugs. Tier 1s and 2s have had co-pays from $0 to $10 for a 30-day supply. Tier 3s, known as Preferred Brand, from $37 to $47. And Tier 4s, aka non-preferred, around $100. Tier 4 drugs on Stand Alone plans are not provided on a flat co-pay basis and once again charged as a percentage of the retail, as much as 50% on some plans. Very rarely should anyone be charged the higher Tier 4 amount, however. Let me explain. Part D is regulated to protect the consumer. All plans must cover at least two drugs ( most cover several more) to treat every medical condition. They must also provide “Tier Exceptions.” Our clients are instructed that if they ever get put on a Tier 4 drug to call us immediately before paying. We then find out what other lower Tier medications are covered to treat their particular diagnosis and have the client reach out to the prescribing physician to see if any on the list would be a safe and effective substitute. If the doctor has a legitimate medical reason why they wouldn’t be, there’s a pretty simple process for the doctor to explain to the insurance company what that is. We’re almost always successful getting the cost of a client’s Tier 4 drug lowered.
The “Coverage Gap,” aka The Donut Hole, is Stage 3. There’s no avoiding it on either a Stand Alone or Advantage Plan. Here’s how it works. In 2023, once anyone on Part D receives $4,660 in retail medications, the Coverage Gap starts. For example, the most widely prescribed medication among our clients is Eliquis, a blood thinner that retails on average for $600. Ozempic and Trulicity are newer and widely taken by diabetics. They retail for around $1,000. If the former is being used and was the only brand name prescribed, the Coverage Gap will start in July or a bit later depending on what the retail cost is on other meds being taken. Those on drugs in the $1,000 range will find themselves there in four or five months. At this point, the cost of medications becomes 25% of the retail meaning Eliquis would be $150 and the $1,000 meds $250 for a 30-day supply. Stage 3 is not graduated from until about $2,200 for those on Advantage Plans, and $2,700 for those on Part D has been spent.
Once that occurs which generally happens only to those taking two or more brand name drugs, the “Catastrophic Stage” 4 begins. During this time, the cost for medications is either 5% of the retail or just under $10 for brand name medications, whichever is greater. That can be a huge relief for many, but those on oral chemotherapy, which can retail for over $10,000 for a 30-day supply would still pay $500 or more every month. Unfortunately, when the next year starts, the cycle begins anew.
There is some light at the end of the tunnel for individuals who find themselves in the Catastrophic phase each year. In 2024, it won’t exist. This means once that $2,200 to $2,700 out of pocket has been met, all medications will be no cost for the rest of the calendar year. This is a mandate of the Inflation Reduction Act that recently passed. In 2025 and beyond, out of pocket costs will be limited to $2,000 before all medications become $0 for the remainder of the calendar year.
The agents and staff at The Health Insurance Store are relentless in finding our client’s ways to save money on prescriptions. From reviewing Stand Along Part D every year, helping clients get Tier Exceptions, finding alternative medications, researching Canadian and other pharmacies across the country, utilizing Good Rx and other discount outlets, to researching Patient Assistance Programs and other foundations, there is rarely a situation where we can’t find a solution.
If you have questions regarding this column or would like to set up a no cost consultation to go over your Medicare, health, or life insurance options, give us a call or email me personally at aaron@getyourbestplan.com.
Get Your Part D Reviewed
Another mistake those on Supplements make is remaining on their Part D prescription plan without having it reviewed professionally, which should be done every year. Two of the most popular plans are almost doubling their premiums while not offering better coverage. It’s also common for drug tiers on plans to be moved from 1 to 2, 2 to 3, and so on. Failure to change Part D plans can be extremely costly. Even if you didn’t buy your Supplement from The Health Insurance Store, we can review and recommend a plan for 2023, just like we do for all our active clients. If you’re interested, please contact us as soon as possible so we can get you the necessary form.
There aren’t many significant changes to Advantage Plans, but indeed some items worth mentioning. Probably the biggest news is the reduction of the MOOP by one of our three major companies. In 2021 they raised it significantly across the board on all their plans to the maximum allowable by Medicare. It stayed the same in 2022 and many members chose other carriers due to the increase. However, on a select number of plans, including what we feel is their best for 2023, it has been reduced by $3,000 and is now the lowest in the market for those that supply prescription coverage.
If you weren’t aware, there are no preexisting condition clauses with Advantage Plans. Anyone who has Medicare Parts A and B can change plans or companies regardless of their current or prior health, even those who have End Stage Renal Disease. All Advantage Plan companies must accept you and begin to pay claims the 1st day the policy goes into effect. In addition, all Advantage Plans must cover the same categories of benefits. As I’ve written on so many occasions, paying more in premium doesn’t get you any additional coverage for medical services! In fact, we will not be advising our current or potential clients to choose any Advantage Plan that will have a premium above $40 per month in 2023. If you are paying over $40 for your HMO or PPO, you should call or email us to set up an appointment and see side by side why paying more doesn’t equal more.
How will Inflation Affect AEP?
Lastly, due to inflation, we’re expecting this AEP, which begins on October 15th, to be the busiest we’ve ever had in terms of moving people from Supplements to Advantage Plans out of financial necessity. If there was ever a good time to do that, now is it because the most competitive plans have never been better in the 15 years I’ve been in the Medicare industry. For those who don’t like the thought of leaving a Supplement, there is some good news. You may not have to as it appears one of the biggest increases in the Social Security Cost of Living Adjustment (COLA) is going to be announced soon. It’s estimated to be from 8.5% to almost 10%. And for once, the raise will not be eaten up by a large Part B premium increase. In fact, many people believe it’s going to remain $170.10.
AEP is right around the corner!
I’d like to remind readers that the Annual Election Period (AEP) is right around the corner. Pre AEP, when plan details are made public, starts October 1st and AEP, when changes to your plan lineup can be made and applications submitted, begins October 15th and runs through December 7th.
If you enjoy the columns, please consider using our no cost services when going on Medicare for the first time or looking at possibly making a change in plans as well as referring friends or family who are. Enrolling new clients in plans, which cost the same whether you use our free services or go directly through a company, helps us cover the expense of the articles so we can continue to run them every week. As brokers, we are appointed to provide plans from every competitive Advantage Plan and Supplement company in Western PA and West Virginia.
Thank you!
If you have any questions or concerns regarding this column topic, or would like to make an appointment for a no-cost consultation, please feel free to give us a call – we would be happy to help. I’d like to remind everyone that I do a live call-in talk show called Medicare A to Z every 1st and 3rd Monday of the month on WMBS Uniontown, 590AM and 101.1FM, from 1 to 3 PM. You can listen in on their website, wmbs590.com.
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