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Attention seniors, it's that time of the year again -- open enrollment for Medicare Part D, also known as the prescription drug plan portion of Medicare, is under way, as it is every year between Oct. 15 and Dec. 7. During this period, eligible Medicare enrollees have the opportunity to shop around and compare prescription drug plans for the upcoming year under original Medicare. This is also when enrollees can peruse alternative options with a Medicare Advantage plan, which combines all aspects of Medicare, including drug coverage, into one plan.
Big prescription drug increases are headed seniors' way
Choosing a prescription drug plan is particularly important for seniors since they tend to be more prone to expensive illnesses compared to younger adults. According to a study from the Kaiser Family Foundation, seniors taking drugs to treat hepatitis C, multiple sclerosis, or cancer can spend anywhere from $4,000 to $12,000 per year out-of-pocket just to take a single drug -- and this includes what a Medicare prescription drug plan would cover.
Another recent AARP study, Rx Price Watch, found that average annual prescription drug costs have ballooned from $4,140 in 2005 to $11,341 as of 2013 for elderly Americans.
Long story short, picking out the right prescription drug plan is critical to ensuring that seniors get the most out of their plan.
So what are seniors looking at as we head into open enrollment period? According to the Kaiser Family Foundation (KFF), prescription drug plan (PDP) premiums are rising by an average of 9% in 2017 to $42.17, based on the weighted average of 2016 plan enrollment. KFF's estimate includes premiums for basic and enhanced prescriptions plans, and makes the assumption that enrollees stick with their current plan, which may not always be the case.
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As KFF also points out, costs continue to vary greatly for Medicare Part D plans. Among the 10-most enrolled plans in 2016, the average monthly premiums in 2017 range from a low of $16.81 a month for the HumanaWal-Mart Rx plan, which works out to just over $200 a year, to $71.66 monthly for the AARP Medicare Rx Preferred plan, which works out to about $860 annually. Similar differences, though perhaps not to the extreme of the low-end and high-end differing by a factor of four, are seen in individual states, with some seniors looking at cheaper coverage options than others.
How to get the best Medicare drug plan
With rising prescription drug costs looking like a near-certainty moving forward, seniors need to be diligent in their efforts to pick out a PDP that suits their needs best. Here are a few tricks to ensuring you get the best possible value for your Part D plan.
The first step is to shop around. The worst possible thing you can do is to simply allow yourself to be reenrolled in the same plan as last year. Though some seniors will find benefits from reenrolling, this isn't always the case. Part D plans may be contracted through Medicare, but they are offered by private insurance companies that have the ability to alter their coverage from year to year. Just because the drugs you take were covered by your 2016 PDP doesn't mean they'll be covered under the same plan, or at the same rate, in 2017. Taking the time to shop around with Medicare.gov's Plan Finder is a smart move you really should make. Also keep in mind that your window-shopping period should include a look at alternative Medicaid Advantage plans, too, to see if they offer you a better bang for your buck.
Secondly, it's important that you understand the difference between co-pays and co-insurance, especially with more PDPs pushing co-insurance as drug prices soar. Co-payments are flat fees that you pay for each prescription you fill. Co-pays could differ based on the tier of drug you're paying for, but they're otherwise consistent across a tier. Co-insurance, on the other hand, requires the Medicare member to pay a percentage of the total prescription cost. If the drug you're paying for is in one of the higher cost tiers, you could be looking at a lot of money out of pocket -- and don't forget, there are no annual out-of-pocket limits with Medicare. If you can, target plans with a focus on co-pays, or at the very least pay attention to what the co-insurance would be on your medications and seek out the plan(s) with the lowest co-insurance.
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Third, ask your doctor if generic options are a possibility. According to the IMS Institute for Healthcare Informatics, 88% of prescriptions written today are for generic drugs. By 2020, this figure is expected to rise to between 91% and 92%. If you can find a substitute for your brand-name medication that works just as well, you may be able to save in excess of 80% on your out-of-pocket drug costs.
Fourth, take note of what tier the drugs you take fall into. Most PDPs use a five-tier system for prescription drugs, with a higher tier signifying a more specialized and costly drug that'll cost you more out of pocket. Drug tiers can be somewhat variable from one plan to the next, and they can also change from year to year, which can mean a dramatic increase or decrease in out-of-pocket costs. Drugs can be removed from an insurer's approved formulary, too. This is all the more reason to take the time to really compare plans around this time of year.
Finally, don't be late! Forgetting to enroll in a PDP during the defined period (Oct. 15 through Dec. 7) can be costly, with penalties attached that follow you around for the remainder of your enrollment in Medicare (essentially the rest of your life).
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