What to Know When Selecting a Medicare Prescription Drug Plan

Background of Private Medicare Prescription Drug Plans

  • Legislation design by the President G.W. Bush administration and approved by Congress in 2003, resulted in the creation of a new privatized Medicare prescription drug (PDP) and Medicare Advantage (MA) plans for millions of elderly and disabled individuals. However, there was no responsible plan to pay for it. No new federal revenue sources were included nor were there cuts to existing federal expenses. Instead, federal subsidies were authorized for these new privatized Medicare benefits and these private insurers could also retain profits above and beyond their costs.
  • Traditional Medicare insurance which was already serving over 40 millions Americans in 2003, was not allowed to offer prescription drugs or other new benefits that private Medicare Advantage plans included.
  • It should also be noted that private insurers are allowed to pick and choose where and how long they want to sell plans compared to Traditional Medicare that is available to everyone that is eligible in the country.

  • As a result, two new publically funded, private health insurance plans were sold to the public on the assumption that they would cost less than Traditional Medicare and provide more benefits. However, today Medicare Advantage and PDPs cost taxpayers $328 billion/annually in federal subsidies.
  • The 2003 legislation also prohibited Medicare from negotiating drug prices on behalf of subscribers (as is done with the VA and Medicaid) and outlawed the importation of prescription drugs from Canada and other countries where they are sold at lower prices. As a result, prescription drug costs have sky-rocketed over the past 15 years.
  • Today, 43 million people are enrolled in private Medicare Part D drug plans either in stand-alone PDP how many people or integrated within Medicare Advantage plans.
  • In addition, the federal Social Security Administration subsidizes the cost of private insurer PDP premiums, deductibles and medications for 13 million low income individuals. This represents 28% of all PDP enrollees.

Important Facts to Know about PDPs

  • Today, the vast majority of Medicare Advantage Plans today include prescription drug coverage. However, Traditional Medicare and private Medicare Supplemental (Medigap) plans don’t include drug coverage, so a separate private PDP is needed for your medications and to avoid a potential late enrollment penalty.
  • Medicare-approved stand-alone PDPs are sold primarily by large, for-profit insurers such as Aetna/CVS, Cigna, Humana, SilverScript, United HealthCare and WellCare.
  • Private insurers are allowed to charge subscribers plan premiums, deductibles and co-pays/co-insurance for medications in addition to the federal subsidies that they receive.
  • Insurers also exclude specific drugs from their formulary, establish restrictions, such as requiring prior insurer authorization, limit medication quantities and require that subscribers take lower-cost drugs before higher-cost drugs.
  • Each insurer establishes their own drug classifications into pricing tiers and there are significant differences among PDPs regarding the drugs that are excluded/included and the premiums, deductibles, co-pays/coinsurance that subscribers are required to pay.
  • Although PDPs are not allowed to deny coverage or charge higher premiums to subscribers with pre-existing conditions and chronic diseases, insurers have latitude with establishing restrictions and subscriber charges.
  • There are no annual maximum out-of-pocket expenses for prescription drugs in either Medicare Advantage or stand-alone PDPs, so the cost of drugs can create serious financial problems for families.

  • In a 2019 study, reported in Health Affairs Journal, more than half of seriously ill Medicare enrollees face financial hardship with their medical bills with the cost of prescription drugs being the leading problem.
  • Unlike the rest of the developed world, in the US there is no public insurance for medications or government negotiation of drug prices, with the exception of the VA and Medicaid. As a result, the cost of medications to treat millions of Americans with life-threatening and disabling diseases such as diabetes, cancer, multiple sclerosis, Hepatitis B, inflammatory diseases, respiratory diseases, organ transplants are the highest in the world.
  • The cost of medications has become a huge burden on taxpayers; federal, state and local governments; employers; patients and families. This results in more costly health care with poorer outcomes, increases in disability, reduced work productivity and results a major cause of personal bankruptcies in the US.

A  Review of PDPs Available in Rochester, New York

Popular plans offered by Aetna/CVS, Cigna, Express Scripts, Humana, SilverScripts, United HealthCare (UHC)  and WellCare reveal the following observations.

  • Each insurer generally offers 3 plans with different premiums and deductibles. Premiums range from Humana’s Walmart Value plan $13.20/mo. with a $435 deductible, to SilverScript’s Plus plan $91.20/mo. with a $0 deductible.
  • It is common that low/no premium plans have higher deductibles, co-pays/co-insurance and limitations.
  • Only 3 plans have no deductibles (down from 7 plans in 2019) but all have high premiums. The 3 plans include SilverScript Plus with a $91.20/mo. premium, United HealthCare AARP Preferred with a $85.60/mo. premium and WellCare Value Plus with a $76.60/mo. premium.  These plans are not affordable for most people, since the average annual premium is over $1,000 and doesn’t include the cost of your medication.
  • All insurers have developed strong financial disincentives for subscribers who use “non-preferred” brand name and generic medications by establishing medication exclusions, deductibles and up to 50% co-insurance for non-preferred brand name Tier 4 drugs.
  • Many insurers also charge higher prices for “standard” versus their “preferred” and “mail order” pharmacies. However, insurers are generally weak in informing current and prospective enrollees of the cost differences among pharmacy options.
  • There are significant differences among insurers in specific brand name drugs that are either excluded from their formulary or placed into either Tier 4 or Tier 5. And, there are differences among insurers regarding the price of T4 non-preferred brand name  vs. T5 specialty medications. To illustrate, it is not uncommon that T4 non-preferred drugs are billed at a high rate of 32%-50% compared to T5 speciality drugs that are billed at 25%-33%. 
  • An insurer’s “Preferred generic and brand name” medications are not the most cost-effective medications with the least side-effects. “Preferred” medications reflect the deals that the insurers have made with the pharma companies to push their drugs over their competitors drugs.
  • This often occurs with medications for common conditions including rheumatoid arthritis, multiple sclerosis, diabetes and various neurological, cardiovascular, inflammatory, autoimmune and respiratory diseases and cancer.

  • Issues of drug cost, insurance prior approvals and access to treatment is a major source of conflicts among insurers, physicians and patients. So, it is very important to compare plans to understand the differences in coverage, restrictions and cost among plans that you are considering.

In summary, in considering PDPs it is important to confirm if the plans:

  • Do they include your medications and at what cost?
  • Is there a deductible expense on your drugs?
  • What restrictions are imposed on your prescribed medications?
  • Does the plan have preferred retail and mail-order pharmacies?
  • What is the reputation of the insurer with your doctors and pharmacies?

And finally, what is the total annual cost to receive your medications from each plan and the comparative differences in the PDP quality, costs and benefits.

Resources

Free resources are available to help you in comparing costs, coverage and quality ratings among plans. These include:

Medicare Plan Finder

Provides detailed information from Medicare to compare Quality Star ratings, your estimated annual and monthly cost (premiums, deductibles, co-pays/co-insurance) for your specific medications and pharmacies among available Prescription Drug Plans and Medicare Advantage Plans sold in your community.

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State Health Insurance Assistance Program

Provides free personal and group information/assistance with Medicare issues and questions.

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MedicareRights

Helps people with Medicare understand their rights and benefits, and navigate the Medicare system

References

Congressional Budget Office, 2019 reports

Center for Medicare & Medicaid Services (CMS)

Health Affairs Journal

Kaiser Family Foundation, 2019 Data Briefs and Fact Sheets

Medicare.gov

Medicare Rights Center

Medicare Trust Fund Board of Trustees, 2019 Annual Report

 

 

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