How to shop for a Medicare Part D plan

prescription-drug-RR-GuideThe annual Medicare enrollment period provides seniors an annual opportunity to change their Medicare coverage. The two basic options include:

  • Traditional, fee-for-service Medicare alongside a stand-alone Part D prescription drug plan; or
  • A privately managed Medicare Advantage all-in-one option (including hospitalization, outpatient services, and prescription drugs).
Shopping for Medicare Advantage plans? Check out the shopping guide here.

You’re free to make as many changes as you want before Dec. 7; your changes take effect on Jan. 1. There’s also a dis-enrollment period that runs from Jan. 1 to Feb. 14, which can be used by seniors who pick an Advantage plan but want to change their minds. During that period, you can switch back to traditional Medicare but not to a different Advantage plan. And, if you do leave Advantage, you can add a stand-alone drug plan during that period.

With dozens of plans available in most parts of the country, Medicare shopping can be a complex chore. Re-shopping your plan annually makes sense–especially Medicare Part D drug plans, where insurance companies often change their offerings year-to-year in ways that can increase drug costs by thousands of dollars, or make it more difficult to get certain drugs. At the same time, your drug needs may have changed since the last plan selection period in ways that make a plan less beneficial for you.

Prices are expected to rise only 5.1 percent on average, according to Avalere Health. But half of the ten most popular plans are raising premiums at double-digit rates.

Donut hole coverage

The Affordable Care Act gradually closes the doughnut hole, which refers to the gap in coverage when total annual drug spending by you and your insurance company hits a certain point. For 2014, the donut hole will be $80 smaller; you will enter the gap if combined spending by you and your drug plan provider hits $2,850; you’ll exit at $4,550. As in 2013, there will be a combined 52.5 percent discount on brand name drug coverage from manufacturers’ discounts and government discounts. The discount for generics during the donut hole will increase from 21 percent to 28 percent. 

Every month that you fill a prescription, your drug plan mails you an Explanation of Benefits (EOB) notice, which tells you how much you have spent on covered drugs and if you’ve reached the coverage gap.

What counts –and doesn’t count — toward getting out of the gap once you enter?

First, the drug plan premium and what you pay for drugs that aren’t covered don’t count toward getting you out of the coverage gap.

Here’s what does count, according to Medicare & You, the annual guide to Medicare published by The Centers on Medicare and Medicaid (CMS). (The 2014 edition can be downloaded at no charge here).

  • Your yearly deductible, coinsurance, and co-payments
  • What you pay in the coverage gap
  • The discount you get on brand-name drugs in the coverage gap

That last point about discounts is worth noting; even though you’ll receive a 50 percent discount, it’s added back into the total counted toward your spending in the gap. Here’s an example, provided by CMS:

Mrs. Anderson reaches the coverage gap. She goes to her pharmacy to fill a prescription for a covered brand-name drug. The price for the drug is $60 and the dispensing fee is $2. Once the 50% discount is applied, the cost of the drug is $30. The $2 dispensing fee is added to the $30 discounted amount. Mrs. Anderson will pay $32 for the prescription, but the entire $62 will be counted as out-of-pocket spending and will help Mrs. Anderson get out of the coverage gap.

Help for low-income individuals

Low-income individuals may qualify for assistance with their Part D premiums through a program called “Extra Help,” which is administered through the Social Security Administration. The subsidy can defray thousands of dollars in costs, and in many cases eliminate prescription drug expenses entirely for participating seniors.

For 2014, individuals with annual income up to $17,235 will qualify for the Extra Help program ($23,265 for a married couple) and up to $13,070 in resources ($26,120 for a married couple). There also are rules governing the assets you can have and still qualify for the program.

Shopping tips

Medicare D plans routinely change the drugs they cover from year to year, so it’s important to review your coverage annually.  Don’t pick a Medicare D insurer simply because you know its name or because it’s your health insurer. And don’t be swayed by a pharmacist’s recommendation. Pharmacies have partnerships with particular Medicare D plans, so they may well recommend a plan that’s in the drugstore’s best interest, not the recipient’s.

The two most important Medicare D plan features to consider are 1) Whether the beneficiary’s drugs would be covered by a particular plan and 2) Whether the pharmacy you want would deliver the drugs. (Medicare D plans don’t work with all pharmacies and vice versa.)

Then, of course, there’s the cost. Medicare D premiums can vary by thousands of dollars among plans. While it’s tempting to go for the lowest price, that can be a costly mistake. Watch out for these three traps when comparing plan costs:

  • Misleading drug prices: Examine the cost of each drug over the full year. The amount can vary month to month based on the way the plan sets prices.
  • Drug usage restrictions: A drug may be included in a plan, but with restrictions on its use.
  • High delivery costs: Mail-order drug delivery is less expensive with some plans, but not with others.

The best online tool for shopping plans is the Medicare Plan Finder at the Medicare website. Plug in your Medicare number and drugs (you’ll need each drug’s name and dosage). The tool then displays a list of possible plans; their estimated cost, premiums, and deductibles; which drugs are covered; and customer-satisfaction ratings. The finder also will give you advice about drug utilization and restrictions.

All seniors receive an annual notice from their current providers by the end of September that summarizes plan changes for the coming year. However, the statement doesn’t offer a detailed, personalized summary of formulary changes that might affect your coverage. For that, it’s important to use the Medicare Plan Finder.

Another useful feature of the Plan Finder is the plan quality rating system, which utilizes data gathered by the federal government measuring whether patients received appropriate procedures and patient satisfaction feedback.

Although it’s possible to enroll online via the Plan Finder, the MRC recommends that you confirm coverage information by phone with a plan representative and that you keep a written record of that conversation. The Center also recommends enrolling by calling Medicare’s enrollment hotline (1-800-MEDICARE), rather than talking directly with the plan.

“If you get erroneous information from the government, that’s a reason to let you out of a plan later if necessary,” says Baker. “If a plan representative gives you wrong information, you’re out of luck.”

If you don’t have a copy handy, download the federal government’s free guide to Medicare benefits, Medicare & You. This is the definitive source on all things Medicare and can be useful in plan decision-making.

Free one-on-one help is available from your local State Health Insurance Assistance Program (SHIP), a network of non-profit Medicare counseling services. Click here to find the SHIP program in your state.

The Medicare Rights Center also offers free counseling by phone (1-800-333-4114).

If you’re willing to pay to get advice and help with paperwork, hire an independent, fee-based, counseling service such as Allsup Medicare Advisor (1-866-521-7655). For a few hundred dollars, Allsup assigns an advisor who will provide a written personalized plan analysis and offer phone consultations.