Important Medicare Changes Are Coming!

As any large government-run system, Medicare is slow to change. So, when a significant change does come along, it’s important to understand exactly how it will affect you and your family. The most recent one goes into effect on January 1, 2019 and will impact retirees with Medicare Part D (prescription drug coverage).

Here are the key facts you need to know.

When Medicare Part D was created in 2006 to cover outpatient prescription medications, the lawmakers wanted to encourage retirees to ask for generic drugs over brand-name ones. To accomplish that (and to control the cost of the program), they created a coverage gap or a “donut hole”. This gap caused retirees to pay more on per-prescription basis for a certain portion of the year.

For a retiree with Medicare Part D coverage in 2018, the numbers could have played out as follows.

• First, he or she would have to cover the annual deductible out of pocket ($415).
• Next, he or she would pay 25% towards all prescription medications (generic and brand-name) until the co-payment amount reached the start of the coverage gap ($3,750).
• Once in the coverage gap, he or she would pay 44% towards generic drugs and 35% towards brand-name medications until the total out of pocket cost reached $5,000.
• Beyond that “catastrophic” maximum, the participant would pay the greater of $3.35 for a generic drug and $8.35 for a brand name drug, or 5% of either drug’s cost, for the rest of the year.

Why would someone not just choose generics? There are several reasons. Some prescriptions are simply too new to have generic equivalents. Others work better in brand-name form. As a result, many retirees were hurt by this provision.

Anyone who has experienced the coverage gap can tell you that the infamous “donut hole” is both frustrating and expensive. Most people who end up in the “donut hole” aren’t being “too picky” with their prescription choices. The extra expense is a significant drain for the families on a tight budget. Some retirees are forced to switch to generic versions of their usual medications and suffer the fact that some generics don’t work as well. Others try to stretch their brand-name prescriptions or skip them altogether, which can result in relapses, flare-ups of chronic conditions, and additional hospitalizations.

The good news is that starting January 1, 2019, the coverage gap for brand-name prescription medications is going away. Using our example above, here is what Medicare Part D users can expect in 2019.

• Steps 1 and 2 will remain unchanged.
• Once you reach the start of the coverage gap ($415 deductible plus $3,820 which is the new Initial Coverage Limit for 2019), you have to cover 25% of the cost of brand-name drugs (same as before) and 37% of generics.
• After you reach the new maximum of $5,100, you pay the greater of 5%, or $8.50 for brand name and $3.40 for generic medications.

Exactly how this will affect you and your family will depend on the specifics of your health situation. Every Medicare Part D participant will benefit from lower per-prescription cost in the former coverage gap. The reduction will be more dramatic for brand-name medications that tend to be more expensive.

However, someone who needs extended use of brand-name meds could still be paying a lot each month. That’s because co-pays for brand-name drugs are calculated as the greater of $8.50 or 5% of the cost of the medication. For prescriptions that cost several hundreds of dollars for a round, that seemingly small 5% can add up to considerable totals.

What should you do to be prepared for these changes?

• Talk to your doctor about your plan for prescription medications for the coming year. At this point in the year, you are outside of the Open Enrollment Period that allows you to switch from Original Medicate to Medicare Advantage. However, a conversation with your doctor is a useful start for estimating what you should be prepared to pay for prescription medications during the year.
• Remember that Open Enrollment Period runs from October 15 to December 7. Do your research early so that you can make the best financial choices for 2020.
• Know that Medicare Extra Help (a Low-Income Subsidy which helps people with limited income and resources) is another option to help you pay for your prescription meds. If you qualify, you can switch plans as often as once per month.
• You can switch plans outside Open Enrollment Period if you have moved out of the area served by the current plan, have experienced a change to the plan where it no longer serves your area, or qualify for Extra Help.