How to Help Parents and Grandparents Rein in Medical Costs
Having the Medicare drug talk is especially important for 2021
One common cost of aging — prescription drugs — eats up an ever bigger chunk of retiree budgets. An analysis of government data by the Senior Citizens League reports that from 2000 to 2020, the average out-of-pocket cost for prescription drugs increased more than 250%, to nearly $3,900 per household. During that stretch, annual inflation adjustments to Social Security payouts rose a total of just 53%.
While it’s not necessarily practical — or your place — to provide budgeting advice to parents or grandparents, stepping in to help them shop for the most cost-effective prescription drug coverage add-on to their Medicare coverage can be easy turf to navigate. It’s not about lifestyle, or personal choices. You’re just offering to help comparison shop for what is essentially a commodity, with an eye on reducing their out-of-pocket costs.
Which seems to be something most enrollees don’t do. According to the Kaiser Family Foundation (KFF), only one in 10 enrollees in Original Medicare who also has a complementary Part D prescription drug plan switched Part D plans during the 2016 open enrollment period (the latest data available). Less than 10% of Medicare Advantage (MA) enrollees who chose a plan with prescription drug coverage opted to switch.
It’s possible 90% are thrilled with what they have. But what’s more likely is that they just stick with what they have rather than try to navigate the insane complexity of choice. More than half of people surveyed by KFF said they don’t review their coverage during the annual open enrollment period, and more than four in 10 people who have chronic conditions (and thus are most motivated to have a cost-effective plan) said they didn’t comparison shop because it was too difficult to make sense of their options.
That’s understandable. There are typically at least two dozen plans offered in an enrollee’s geographic region. And it’s costly because a plan that made sense last year, or many years ago, may not for the coming year. A plan may drop a drug from coverage, or change the copay/coinsurance for a drug.
Drugs covered by a plan are placed in a price tier. A drug in Tier 1 (generics) might require no copay. A Tier 2 drug might require a copay of $10 to $20. Tier 3 and Tier 4 (specialty drugs) charge more. As you move up the tiers, your plan may also require you (or your doctor) to get preauthorization. Knowing what tier a specific drug will be in is crucial to shopping wisely.
What’s more, there is no uniformity in a drug’s price across different plans. Wildly different negotiated prices for a given drug are not uncommon. If you pay a percentage of that cost, well, it matters.
Premiums vary, too. The average monthly premium for 2021 will be around $41 according to Q1Medicare.com. But the range is from less than $6 to more than $205. A low premium can end up being a costly mistake if higher copays and coinsurance translate into higher out-of-pocket expenses.
Anyone on an insulin regimen definitely wants to comparison shop for 2021. About one-third of drug plans have agreed to offer coverage with a monthly copay of no more than $35. That said, keep in mind that plans that offer insulin coverage typically will charge a higher premium. Depending on the type (and cost) of insulin drug used, it may not be advantageous to use an “enhanced” plan.
Offering to wade through the options is something that may be easier for you, and not as easy for someone you love. There are free online tools that provide personalized cost estimates based on specific plans offered in an area, and the specific drugs an enrollee uses. The Medicare.gov website has an online cost comparison tool.
The Q1Medicare.com website also has a comprehensive free search engine that compares costs in your region, based on your medications.
If someone is enrolled in Original Medicare (about 70% of Medicare enrollees), switching Part D Prescription drug plans is easy to do; it doesn’t impact their core Medicare coverage. For enrollees in Medicare Advantage (MA), drug coverage is embedded in the overall plan, so changing medical coverage involves re-enrolling in a new MA plan with the prescription drug coverage that is desired:
Enrollees in both types of Medicare coverage can make changes during the open enrollment period that runs Oct. 15 to Dec. 7. And if someone is enrolled in MA they can also make a change during a separate MA-only open enrollment period that runs from Jan 1. to March 31. (Confused? Welcome to your parents’/grandparents’ hell.)
As with all types of insurance, a low monthly premium can be penny wise and pound foolish if it means higher copays on prescriptions for someone with chronic medication needs.
We’ll cover the three coverage periods of Medicare Part D in another column.