Upcoming changes to drug costs, plan options, premiums present advisor opportunities
During this year’s Medicare Open Enrollment Period, your clients might want your help. That’s because each year Medicare health and drug plans change their products, including costs, what’s covered, and what pharmacies and providers are in their network.
Even if you don’t directly offer health insurance or Medicare plans, as an advisor doing retirement planning you should have a working knowledge about the basics, because most Medicare premiums are deducted out of a retiree’s Social Security check.
Medicare Open Enrollment
During open enrollment from October 15 through December 7, individuals can join a Medicare Prescription Drug (Part D) Plan, switch Part D plans or drop their Part D coverage altogether. They can also switch from Original Medicare to a Medicare Advantage plan, and vice versa, or change Medicare Advantage plans.
But because of the wide variety of costs and new coverage options between plans—particularly for prescription drug coverage—it may be worthwhile for clients to examine what’s under the hood of their current plan, if that plan has made any changes for 2019 and what, if any, other options from another provider would make sense.
“Competition will be particularly heated during this fall’s open enrollment season as a result of upcoming changes in prescription drug plan costs for 2019 and the ability of Medicare Advantage plans to offer some new benefits, such as adult day care, home support and caregiver support services,” Mary Beth Franklin writes in this September 28 post in InvestmentNews.1
Changes for 2019
The percentage of out-of-pocket costs that Medicare Part D Prescription Drug Plan participants had been paying for brand name drugs in the coverage gap (known as the donut hole) is decreasing a year earlier than previously expected. The coverage gap in 2019 is between the initial coverage limit of $3,820 and the out-of-pocket threshold for catastrophic coverage of $5,100.2
Thanks to the budget deal agreed by Congress and signed by President Trump in February, participants will pay 25% of their out-of-pocket costs for brand-name drugs in the coverage gap, down from 35%. They will continue to pay 37% for generic drugs in the coverage gap until 2020 when that percentage is also reduced to 25%.
Participants may also have other opportunities to pay less for out-of-pocket drug expenses if they shop around. That’s because cost comparisons for commonly used medications show a wide disparity. An analysis released in September by The Senior Citizens League, a 1.2 million-member supported nonpartisan senior advocacy group, found that there can be more than a thousand dollars in price difference among drug plans for the very same drug.3
“Because Medicare isn’t negotiating prices on our behalf, there’s no consistency in drug pricing among Medicare Part D drug plans,” said Mary Johnson, a Medicare policy analyst for The Senior Citizens League, who performed the comparisons using the Medicare website’s Plan Finder.
In addition, people aged 65 and over may be taking more than one prescription drug. “To get the lowest-cost and best plan, people need to compare plans based on all the drugs they actually take,” Johnson said.
New MA Open Enrollment
Another upcoming change on the horizon is the new Medicare Advantage Open Enrollment Period. It replaces the Medicare Advantage Disenrollment Period which had taken place each year from January 1─February 14. The new Medicare Advantage Open Enrollment Period runs annually from January 1─March 31.4
During this period, if your clients are enrolled in a Medicare Advantage Plan (with or without drug coverage) they can:
- Switch to another Medicare Advantage Plan (with or without drug coverage); and
- Disenroll from their Medicare Advantage Plan and return to Original Medicare, with the ability to join a Medicare Prescription Drug Plan.
1“An adviser’s guide to Medicare open enrollment,” Investment News, September 28, 2018 https://www.investmentnews.com/article/20180928/free/180929913/an-advisers-guide-to-medicare-open-enrollment (accessed October 8, 2018).
2“Closing the Medicare Part D Coverage Gap: Trends, Recent Changes, and What’s Ahead,” Henry J. Kaiser Family Foundation, August 21, 2018. https://www.kff.org/medicare/issue-brief/closing-the-medicare-part-d-coverage-gap-trends-recent-changes-and-whats-ahead/ (accessed October 8, 2018).
3“Why You Should Compare Medicare Drug Plans ─ Comparison of Drug Prices Finds Extreme Variation in Costs, According to Analysis Released by The Senior Citizens League,” The Senior Citizens League, September 27, 2018. https://bit.ly/2RyBIx7 (accessed October 8, 2018).
4“Medicare Advantage Open Enrollment Period,” Medicare.gov, The Official U.S. Government Site for Medicare https://www.medicare.gov/index.php/node/33581 (accessed October 8, 2018).