This week a patient with Parkinson’s disease told me that his insurance would not pay for a much needed medication. This is not the first time I have had a patient tell me that a necessary medication has become unaffordable.

It just so happened that this week I received an email from Kris Cowles, who specializes in helping individuals with Medicare Part-D coverage.. I thought his explanation was  excellent and simple and a worthwhile reference. Kris is located here in Florida, but I’m sure he wouldn’t mind hearing from you wherever you live.

It’s getting to be that time of the year again! No, not the time when kids get out of school for summer…but, the time when my phone starts ringing off the hook because some of our Medicare client’s prescription drug costs are skyrocketing!

The calls typically go something like this: Kris: “Hello”

Client: “Kris, what happened? I went to pick up my prescriptions at the pharmacy today and the pharmacist said it was going to cost me $563.29! (This is a completely fictitious amount that I made up, but it’s close.) Is that that donut hole thing that I keep hearing about?”

Kris: “Well, let me take a look and see what’s going on…”

I’ll be the first to say that Medicare Part D Prescription Drug Plans are unnecessarily complicated to understand.

However, having helped thousands of Medicare aged individuals determine their most suitable Part D drug plan, I feel confident in saying that I can explain how they work and exactly what this “donut hole thing” is.

The first thing to keep in mind is that Prescription Drug Plans start every year on January 1st. (Or on your effective date when you are in your first year on Medicare.)

There are FOUR different stages of pricing throughout the year, meaning that prescription medications can cost FOUR different amounts throughout the year. (All FOUR stages may not apply to you.)

The stages are as follows:

Stage 1. Deductible Stage: This stage is where you pay the full cost of the medications, not the co-pay, until the deductible has been met. (This typically applies to just medications in tiers 3, 4, 5 and sometimes tier 6.) The maximum deductible in 2023 is $505, which is an amount set annually by Medicare. A plan can have $0 deductible up to $505 and everything in between. The deductible applies to you as an individual, not each medication. So, the deductible for your plan can be met by paying the full cost of just one medication of many medications.

Stage 2. Initial Coverage: This is when you pay just a co-pay for your medications. There are dozens of plans out there, all with unique and different co-pay pricing structures. The co-pay that you pay is either a flat dollar amount OR a percentage of the full cost of the medication. The co-pay that you pay here can vary significantly from plan to plan. Also, there is different pricing depending on the pharmacy that you use. Here is where it gets tricky…while you’re in this phase, there is a calculation going on in the background on your behalf based on the full cost of the medications that you have received, NOT the co-pays that you have paid. When this calculation totals $4,660 of medications received, you will be moved to Stage 3. FOR EXAMPLE : Let’s say the real cost of a 30-day supply of a medication is $800, but the co-pay amount that you pay is just $20, each 30-day refill of the medication adds $800 to towards reaching that $4,660 amount. So, a 90-day refill would add $2,400. Does this make any sense? If you said NO, I agree, but this is how a government run program works.

Stage 3. The Coverage Gap aka The Donut Hole: Many people will never experience this stage and the sticker shock that accompanies it. But those who do are typically very unhappy to be here. In this stage, you will no longer pay just the co-pay, you will pay 25% of the real cost of your medications and the insurance company will pick up the tab for the other 75%. Initially, this sounds like a good deal, you only pay a quarter of the cost, and the insurance company will pay the other three quarters. However, let’s put some number to this shall we. Using the example from stage 2 of the real cost of $800 for a 30-day supply of medication. In stage 3, the cost is no longer just $20, but 25% of $800, which is $200. So, if you’re filling a 90-day supply, the pharmacist will now ask you for $600. ($200 x 3 months) The same calculation is happening here as was happening in stage 2, but this time it takes $7,400 to get to the next stage!

Stage 4. Catastrophic Coverage : If you ever reach this stage, you’ve made it through the donut hole and now you pay just a small co-pay amount for the remainder of the year. A few things to keep in mind:

  • This process starts over again every year on January 1st!
  • You can reach the next stage in the middle of a refill, therefore that particular refill can be pro-rated where part is at the price in one stage and part is the price in the next stage. (Just to add more confusion)
  • Different plans have different Preferred Pharmacies where the costs are the least. (Always ask me about this)
  • Prescription Drug Plans can be reviewed every fall from October 15thto December 7thto determine the most appropriate plan for the year ahead based on the current medications. (We are unable to change plans mid-year.)
  • Medicare Prescription Drug Plans are the biggest reason for overspending on health care, do not ignore it!
  • The largest savings that I ever found for a Medicare client on their medications was $54,000! (He had been ignoring the costs and his previous agent had never reviewed his options with him.)
  • I send emails every fall to my clients offering to review their Prescription Drug Plans for them, keep an out for these emails starting in September.

If you have any questions about your drug plan’s pricing, please feel free to schedule a time for us to discuss using the button below.

If any friends, acquaintances, or family members are struggling with their Medicare plan or will be transitioning to Medicare soon, I’d love to speak with them.

All the best,

Kris Cowles:

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