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Finding a low-cost Medicare Part D plan

We’re approaching the season of senior confusion, otherwise known as the Medicare open enrollment period. And the biggest open enrollment obstacle is Medicare’s Part D. It is perplexing enough that most people simply ignore it and decide to remain in their current plans, losing money in the process.

The Medicare Payment Advisory Commission (MedPAC) has cited a Kaiser Family Foundation analysis which found that just over 12% of Part D enrollees change their plans in any given year. That’s fairly consistent with another analysis mentioned in this year’s MedPAC report, one which showed that only 15% of people change their plans each year.

Such low rates of change may seem surprising because, as the Kaiser Family Foundation analysis pointed out, only a small fraction of enrollees are enrolled in the lowest-cost Part D plan available to them. Estimates indicate that 90% or more of Part D enrollees pay too much for their prescription drugs. Their unwillingness or inability to switch to lower-cost plans – due mainly to Part D’s complexity — costs them hundreds of dollars a year, on average. And it adds billions to the government’s tab.

Here’s what researchers have found about how much people overspend for Part D. Two years ago a study of more than 400,000 Medicare beneficiaries in Part D plans found that 94% of them were not in the low-cost plans for their drugs and that as a result they paid $368 a year more than they should have, on average.

Another study estimated that at least 75% of people with Part D plans spend an average of $300 a year too much by staying in expensive plans. And an earlier report by the Kaiser Family Foundation found that a mere 6% to 9% of Part D enrollees were in the lowest-cost plans for their drugs. The other 90+% could have saved between $360 and $520 a year by changing to the lowest-cost plans.

One obstacle to finding a low-cost plan is the sheer number of choices. In 2015 each state will have an average of 29 Part D stand-alone plans, no two of them exactly alike. Each plan has its own drug formulary, cost-sharing requirements, and preferred pharmacies. Most of the 2015 plans have a deductible, but some don’t. Most of the plans have lower costs for mail-order refills, but others do not.

Plans also have different quality ratings and drug restrictions, which in some cases will require prior approval before you can have a prescription filled. These restrictions vary by plan but must be indicated by a footnote on Medicare’s drug plan search. If you don’t understand them before you enroll, you may be asking for later frustration when you try to fill a prescription.

With so many variables, it’s not surprising that the vast majority of seniors find it difficult to choose the best plan for their drugs. When New York Times health care columnist Jane Gross turned 65 and enrolled in Part D for the first time, she said that it took the better part of three days for her to find a low-cost plan with her neighborhood pharmacy in its network. Her 2012 article D is for Dazed chronicled her search for plan.

To avoid the complexity of choosing a low-cost plan, many seniors simply select a plan with low premiums. That can be an expensive choice, however, depending on the drugs they take. The lowest-premium national plan in 2014 is the the Humana Walmart Rx Plan with its $12.60 a month premium. But seniors may easily pay too much in this plan, depending on the drugs they take.

As an example, someone who uses only one prescription drug – the popular Advair Diskus inhaler – will pay either $470 too much (mail-order refills) or $306 too much (retail refills) in 2014 in the Humana Walmart Rx Plan. The lowest-cost plan for someone who takes only Advair Diskus is the higher-premium Wellcare Classic plan, which costs $22.40 a month.

Another mistake people make is assuming that the lowest-cost plan for their drugs in one year will also be a low-cost plan the following year. A fairly recent example of how quickly costs can change involved Celebrex, a brand-name drug used to treat arthritis symptoms. In 2012 the lowest-cost national plan for a person taking Celebrex and no other drugs was the Humana Enhanced plan. But the following year (2013), the Humana Enhanced plan cost $530 more (mail-order refills) for someone taking only Celebrex than did the Silverscript Choice plan.

The insurance companies that sponsor Part D plans understand that 1) people prefer plans with low premiums and 2) they tend to stay with plans after they choose them. Knowing this, they design low-premium plans with higher average cost-sharing. For new retirees who take one or two generic drugs, this kind of design can work well because it usually shifts costs to older people who take more prescriptions. One indication that this kind of design is prevalent is that as people age, they increasingly overpay, as one recent study showed. And as people age, they are less likely to switch plan unless a price shock that forces them to.

MedPAC reported last year that a declining percentage of people switch plans in older age groups – 15% of people in the 65-69 age group switched their Part D plans in 2010-2011, but only 10% of those who were 80 or older did. And of course as people age they are more likely to have some cognitive impairment, which makes it particularly daunting for them to change plans.

The solution is to ask an expert to compare your area’s Part D plans for you. Every state and most counties have a Medicare counseling agency that performs drug plan searches at no cost. The national directory of Medicare counseling agencies can help you to find the nearest one. Another option is the Medicare Rights Center’s national help line (800-333-4114), and there’s Medicare itself (800-MEDICARE). Open enrollment is the busiest time of year for these agencies, so be prepared to leave a callback number.

Or you can use the Medicare web site to do your own drug plan search. The web site displays your costs in all the Part D stand-alone plans and in Medicare Advantage plans that include Part D coverage. After you’ve answered a couple of basic questions and entered the drugs and dosages you take and the pharmacy you use, the web site crunches each plan’s costs – premiums, co-payments, co-insurance, and deductibles — to find the least expensive plan. If you write down the date of your search and the unique ID number that Medicare assigns to it, next year you won’t have to re-enter your drugs and dosages, although you will be able to modify your drug list. And be sure to sort the results in at least two ways – by the cost of 30-day refills and by the cost of mail-order refills – to find the lowest cost regardless of refill schedule.

If you get your Part D coverage through a Medicare Advantage plan, you will need to consider more than a plan’s drug costs. Other important criteria are whether your physicians are a plan’s network and the plan’s quality rating. Because there are several criteria to consider, it’s less likely you would change Advantage plans based solely on drug costs. If you take more than two generic drugs or even one brand-name drug, however, you should perform a drug plan search to see how much you are paying for your prescriptions compared to other plans. And if the potential savings in another plan are substantial, you can see whether your physicians are in the plan’s network and whether it has a high quality rating from Medicare.

In the last few years there have been worrisome signs that seniors’ drug costs are increasing, particularly for those who take several drugs and who have multiple chronic conditions. A recent Health Affairs study reported that while prescription drug costs for seniors with four or more chronic conditions declined in 2007-2009, they jumped sharply the following two years. Among the causes of the increases was people’s failure to select a Part D plan that was a low-cost option for the drugs that they took. ◊◊

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