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Question from Jen:
Can you explain the four stages or phases of Medicare Part D prescription coverage?
I sure can. Let me first explain there are two ways to get Medicare prescription drug coverage, referred to as Part D.
Those on Supplements, aka Medigap policies, need to purchase a separate policy known as Stand Alone Part D. Those on Medicare Advantage Plan HMOs and PPOs have Part D included with the exception of a select few plans that are designed for those who get their drug coverage through the VA, PACE, or as a retirement benefit.
Stage 1 is the Deductible: This is the amount you pay for certain drugs before the plan starts covering its share. Deductibles can be $0 up to the maximum, which will be $545 in 2024 and most Stand-Alone Part D plans now have. Not all medications are subject to the deductible such as Tier 1 and 2 generics which generally have a small or even $0 co-pay. In Western PA almost all Advantage Plans DO NOT have a Part D deductible, although in several other states they do.
Stage 2 Initial Coverage: These are costs you pay after meeting the deductible or if the deductible does not apply. You and the plan are paying for your medications during this stage. Most Stand-Alone Part D plans have coinsurance on Tier 3 medications of 18% to 25% of the drug’s retail cost. This can be quite expensive. Advantage Plans still have a flat co-pay for $42 or $47 for a 30-day supply in 2024. Those on Advantage Plans who take a brand name medication that retails for around $600 for a 30-day supply (approximate industry average) usually save about $1,000 annually. However, those who take two or more expensive brand name medications will likely save no money on medications versus Stand Alone Part D.
Stage 3 Coverage Gap: Commonly known as the Donut Hole, this stage begins when total retail drug costs (what the insured and insurance company has paid) reach $5,030, the threshold next year. People in the Donut Hole pay 25% of the retail cost of medications during this stage. This is also when those on Advantage Plans start to feel the pain as costs go from a flat one-month supply co-pay of $42 or $47 to 25%, which is $150 for a medication that retails for $600. In 2024 when one has spent approximately $3,200 out of pocket for medications, he or she exits the Donut Hole and moves into Stage 4.
Stage 4 Catastrophic Coverage: In the past, when one exited the Donut Hole, he or she would continue to pay 5% of the cost of medications during this stage. That may not sound like much but was still very costly for those who took oral chemo meds which can retail for as much as $15,000 per month. In 2024, there will be zero cost for all covered medications for those who enter the Catastrophic phase, which is great news for those who take medications that are super expensive. We have clients who will save $5,000 to $15,000 due to the elimination of the 5%.
More people than every are hitting their Donut Hole, however, as the retail cost of medications have gotten so high in the last 10 years, increasing as much as 600% or more since the inception of the Affordable Care Act. The very popular diabetes drugs that are also being touted as helping with weight loss retail for close to $1,000 per month. Even those on Advantage Plans will find themselves paying high costs as they wind up in the Donut Hole by June or earlier and on the hook for up to $250 per month for these non-insulin injectable medications. At The Health Insurance Store, we always make our clients aware of any and all programs that can alleviate the financial burden of brand name medications.
I would like to remind people although Advantage Plans have a lower overall cost for brand name drugs in 2024, that may not be the case in 2025 and beyond. Before making the move from a Supplement to and Advantage Plan, always check with an agent at The Health Insurance Store first to make sure any drug savings won’t be eaten up by the additional out of pocket medical costs Advantage Plans have that Supplements do not.
On a related note, we’ve been getting a ton of calls from our own clients and others asking how their Stand-Alone Part D drug plan premiums can have monthly premiums of less than a dollar for 2024. They’re concerned at such a low price how their medications will be covered and if it’s still a good plan. The answer to how a Part D insurance company can charge pocket change for prescription insurance is the same as how Medicare Advantage Plans can have $0 premiums; they’re heavily subsidized by Medicare and don’t need to charge high premiums to make a profit. As I’ve written on numerous occasions, paying more for a Part D plan has no bearing on the quality of coverage and is not in many people’s best interests.
Another of the benefits of being a client of The Health Insurance Store is each Annual Election Period we check every single Supplement client’s Part D options to make sure they are on the one that provides the best value. I estimate that over 75% of our clients were best on the plan that has a monthly premium of less than one dollar and that includes those who take some of the most expensive brand name drugs on the market. We would never put our clients at risk of higher out of pocket costs or not having coverage for life sustaining medications. We also get involved if there ever is a problem getting a prescription filled or paid for.
There is indeed a possibility that we will discontinue the columns in the Post-Gazette due to the cost of running it at some point this year. If this does occur, we will still publish them on our Facebook group with the same name as the columns. We also run two other exclusive weekly series there as well. To join that group log into our website and click the light blue banner that’s near the top of the page.
Here’s wishing everyone a happy and healthy 2024! Thanks for reading everyone.
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If you would like to make an appointment for a no cost consultation to go over Medicare options, individual ACA marketplace plans, you’re an employer and would like a second opinion on your group policy, or are interested in life insurance, give us a call or email me personally at firstname.lastname@example.org. And keep the great column questions coming! Also, I am now licensed in over 20 states and able to help people choose and enroll in Advantage, Supplement, and Part D plans throughout the country.
Don’t forget to join our Facebook group, “Ask the Medicare Specialist”, which has the same name as the column, where we post exclusive content and information. Go to our website, getyourbestplan.com, and click on the banner on the homepage to become a member. Thanks for reading everyone!
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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