Prescription drugs are a major spending item for many retirees, and the cost of prescription drugs is expected to increase faster than other categories of spending, including medical expenses in general.Older Americans tend to spend more on prescriptions, and the annual cost increases each year.
Though some of the spending is due to price increases and inflation, those are not the major reasons prescription spending increases. People tend to take more prescription drugs as they age, because they develop more health conditions that now are treatable by medications.Prescription drugs are the largest out-of-pocket medical expense for most Medicare beneficiaries who aren’t paying for long-term care, according to the Kaiser Family Foundation.
The foundation also found that in the five years ending in 2015, the share of Medicare enrollees spending more than $2,000 out of pocket on brand-name prescription drugs almost doubled.Unfortunately, many people pay too much out-of-pocket for prescription medications. Wise use of a Medicare Part D prescription drug policy or Medicare Advantage plan can decrease your lifetime out-of-pocket prescription spending.
Medicare Part B does not cover most prescription drug costs. For help in con-trolling prescription spending, you need a Part D prescription drug insurance policy or a Medicare Advantage plan.
Part D insurance policies are issued by private insurers, but they are regulated by the Centers for Medicare and Medicaid and are subsidized by taxpayers. If you enroll in a Medicare Advantage plan, similar prescription drug coverage is part of your plan. Shop for a Medicare Advantage plan the same way I describe below to shop for a Part D policy.
Pay more attention to the medicine cover-age than to the bells and whistles (such as gym memberships) that are featured in marketing campaigns. You should take out a Part D policy when you first are eligible, usually at age 65. Otherwise, you’ll pay a higher premium each month for the rest of your life once you take out a policy. The longer you wait to take out a policy, the higher the penalty.
You can change Part D policies during Medicare Open Enrollment each year from Oct. 7- Dec. 15. Some states require Part D insurers to accept every beneficiary who wants a policy, while others allow insurers to exclude or offer different terms to beneficiaries who are switching policies.You’ll pay a monthly premium for a Part D policy that is in addition to regular Medicare Part B premiums.
But do not buy a policy because it has the lowest premium. You want a policy that leaves you with the lowest out-of-pock-et costs at the end of the year.Other details of the policy are more important than premiums, such as copayments and deductibles and any discounts the insurer negotiates. But the most important feature is known as the formulary.
The formulary is the list of medicines covered by the plan and how they are classified. Each policy has its own list of covered medicines. Many conditions and diseas-es have more than one drug available to treat it. A policy might cover only one name brand or require you to try that brand first. It will cover an alternative only if the first drug does not work for you or has side effects. This is known as step therapy.
Policies also generally cover only a generic drug if both a generic and brand name pharmaceutical are available.
There can be other nuances.If you already are taking specific drugs or have a health history that indicates you may need certain ones in the future, see how they are treated under different policies before making a choice. Here is the real key. Most policies have a tier system, usually consisting of at least three tiers. Your coverage and out-of-pocket costs vary based on a drug’s tier.
Generally, drugs listed in Tier 1 have the broadest coverage. Usually these are widely used generic and brand-name drugs. Many policies will cover all or most of the cost of Tier 1 drugs.You are likely to pay higher percent-ages of the cost or higher copayments for medicines listed in Tiers 2 and 3. These tiers also are likely to contain drugs that the insurer will pay for only after you’ve tried Tier 1 medicines. Specialty drugs, experimental drugs and some high-cost brand-name drugs might not be covered at all or might be in a separate tier for which you bear a high percentage of the cost. Here is one detail to consider.
Most Part D plans have an initial deductible you must incur each year before it starts to pay for the cost. But many of the plans exclude lower-costing Tier 1 and Tier 2 drugs from the deductible. You have immediate coverage of those drugs without having to meet the annual deductible.The details of the tier system vary from policy to policy. That is why you need to study the formulary before deciding on a policy. Have the details of the drugs you are taking and see how they are covered in a policy.
It also is a good idea to be aware of any drugs you might take in the future because of conditions you have or family history.
Do not assume you will save money by using generic drugs. Because of how Medicare is structured, sometimes it is less expensive to use a brand-name drugs instead of generic ones.
This is especially true if the medicine is classified as a specialty drug, according to a study by Health Affairs. Specialty drugs generally are high-priced pharmaceuticals that treat rare or complex conditions.Again, the lesson is to know your medications, shop around and com-pare. The National Council on Aging has some tools on its website, including an online questionnaire to help com-pare plans. It also offers free detailed information from licensed benefits advisers.
The formularies also list the price of each drug to members. Here again, there can be vast differences between plans.
The Senior League did a price comparison in Part D plans of 10 of the most frequently prescribed brand name drugs. It found significant price differences between plans for the same drugs.
Browse a policy for special conditions. For example, you might need advance approval before a policy covers certain drugs. There also might be quantity limits, or a minimum amount of time might have to pass before a prescription can be refilled.
Once you have a policy, stay alert for changes in the formulary and tiers. It is not unusual for an insurer to make changes from year to year for the same policy or even to make changes during the year.
Three firms covered about 60% of all Part D enrollees in 2019, according to the Kaiser Family Foundation: Unit-edHealth, Humana and CVS Health. Each insurer can have multiple policies. Kaiser also found that the average monthly premium for Part D policies in 2019 was $40, a 4% decrease from 2018.
Premiums have had multi-year periods of rising, flat and falling prices since Part D began in 2006.Studies have found that Part D premiums can vary by as much as 100% for identical or nearly identical coverage.Even after selecting a Part D plan, you can do more to reduce out-of-pocket costs. The cost of the same medicine varies between pharmacies.
A Part D plan might require you to use a particular pharmacy or choose from a select group to receive maximum benefits. To the extent you have a choice of pharmacies, call to check prices on your medication. You’re likely to find a range of prices, except for the most widely used generic drugs.
As with other Medicare-related policies, you can find the choices available to you on the Medicare website, by calling 800-MEDICARE, or by working with an insurance agent or financial planner who specializes in Medicare-related problems.There also are counselors in each state available through the State Health Insurance Program and your local Area Agency on Aging. You can locate the counselors through www.shiptacenter.org.