Welcome to Medicare School Daily, where we help you understand Medicare, save money,
avoid mistakes, and above all else, get the most out of your Medicare benefits. Now today's
topic is unexpected Medicare Part D cost. Now just as a quick reminder when you go on
Medicare, Medicare is broken up into four parts: A, B, C, and D. When a person decides
to stay in original Medicare A and B. A and B. A represents everything inpatient; B is
everything outpatient. Now some people decide not to stay in original Medicare, and they
will get what's called a replacement plan or a C plan. These are called advantage plans.
So it's one or the other for in and outpatient care. Now, when it comes to drug plans, Part
D plans. If you have an advantage plan, they include that as part of the package, it's
all in one. If I stay in original Medicare, this drug plan will be separate. And so today
what I'm talking about are Part D plans, whether it's embedded with the advantage or it is
separate from original Medicare, you can have unexpected costs. So we want to make sure
that you avoid them. There's actually five reasons I’m going to share with you today
so that you'll know why unexpected costs occur and how you can avoid them. Now, the first
reason why people have unexpected costs is because not all medications are going to be
covered by Medicare.
In fact, they tell us that Medicare covers about 95 percent of all medications that are
on the market. Now, folks, there is not one plan that's going to cover all 95 percent
of medication on the market, but Medicare says that there's only about five percent
of meds that are not going to be covered. You just have to find a plan where those medications
are going to be covered. But it could be that you're on a medication that is not covered
by Medicare whatsoever. And that can be very surprising and very unexpected because maybe
it was covered by your group plan or your individual plan, but there's no Medicare plan
available that's going to cover that medications. So hopefully, you’ll find some alternative
or some equivalent to that particular medication. Again, not all medications will be covered
by Medicare. Now, the second reason is not all medications are in, notice, your plan’s
formulary. In most markets today, there's somewhere between 20 to 30 different drug
plans, and those drug plans are going to vary in their formulary. Basically, there are good
formularies that cover about 3000 medications. There are better formularies that are going
to have about 5000 meds that are covered in the plan. And then there's those that are
best and they're going to have about 7000 medication that will be covered. And so what
you must do is you have to do your homework or work with someone that is going to help
you through this process because you want to make sure that your medications are in
your formulary.
Many times people just look at the premium that they have to pay for that particular
plan. Folks, the premium is not the most important thing. The most important thing is a formulary.
So you want to be sure that your meds are covered in your particular formulary, because
if not, you'll be out of pocket 100 percent of the expense of those medications until
you get to change that particular drug plan. Now, the third reason for unexpected costs
or a situation where you have a copay card. Now copay cards are issued by manufacturers
of medications, pharmaceutical companies issue these and they're almost always for high cost
medications. And the copay cards are usually very low. You have a copay card, you may have
a copy of five dollars for a thousand dollar medication or maybe a zero copay for a 250
dollar medication. But what happens is once you go on Medicare, which you're going to
see is, almost always, those copay cards are now going to be void. I wish that you could
continue using those. But if you look in the fine print of those copay cards, and almost
always, on Medicare they're no longer going to be acceptable. The plan is no longer going
to cover the rest of that cost other than just your co-pays.
So now you're on Medicare, so it will go void. And so if that happens, it can be very disappointing.
And so this also can lead to unexpected costs because you're getting it for five dollars,
and now we go on Medicare and the price could be substantially higher. Now, the fourth reason
is actually the most common reason, and that's this: we have surprises because of our out-of-pocket
expenses or co-pays can, notice, they can change throughout the year. Now, if you've
been on an individual health plan or maybe a group health plan, you never had changes
during the year. You had fixed co-pays throughout the year, but when you go on a Medicare plan,
Medicare plans can change, which means your copayments can fluctuate in the same year.
And that surprises people. So let me explain to you why copays can change throughout the
year. See, every part D plan, whether it's embedded within the advantage or it's a standalone
drug plan, is going to have four different stages. Four stages, and each of those stages
represents a different out-of-pocket cost to you. This is why they fluctuate. We start
every plan off in the deductible stage. This year, the deductible on most plans is $435.
And what that simply means is this: if you're paying co-pays for your medications, the copays
apply to the $435. It doesn't mean that you necessarily have to show up and write a check
for $435, what it means, I'll say I'm on two medications and those medications have a four
dollar copay. So what are my medications costing me a month? 8 dollars a month. If I have a
dollar a month copay, will I ever reach my deductible? And the answer is, no, you won't.
In fact, that's where most of you will be. You'll never reach your deductible. But let's
say I'm on some brand name medication or maybe several medications, eventually, I may reach
the deductible. So if I ever reach it, what happens is then I go to stage two. And now
I have copays, and these copays are based upon the tiering of the medication. Every
plan has five tiers. One, two, three, four, five. The lower the tier, the lower your out-of-pocket
copay will be. But here's what's happening that's different than any plan you've ever
been on before. And that's this: while I’m in this stage, Medicare is tracking the actual
retail cost. You're not paying the retail cost, but they track it. And if the total
retail cost any time in the year will reach $4,020, and of course, that's the 2020 number,
this will go up a little bit in 2021 and beyond. But if we ever reach $4,020 retail, again,
you didn't pay that. You actually paid a fraction of that, probably 10 or 15 percent of that,
and the plan you’re on made up the difference.
But if the retail total ever reaches that threshold, then we are done in stage two and
now we go to stage three, which is called the donut hole. And again, this is an unexpected
jump in medications because in the donut hole what happens is instead of a low copay based
upon tier, now I have to pay twenty-five percent of the retail cost of that medication. All
right? And so we can jump from here to here, drastically. Here, it could be a $45 copay;
here it could be $125 copay. And that leaves to, really no financial surprises for people
because now we're paying the total retail cost of that twenty-five percent is going
to be our particular copay, so that's a shocker many times. And then the last stage is called
catastrophic coverage. And this one, by the way, is never disappointing. Everyone's happy
here because now our copay is only five percent of the retail. So now it's actually going
to go down. But here's my point. We want you to realize that every single drug plan has
these four different stages, and your copayments can fluctuate, oftentimes surprising people,
especially as they move from stage two to stage three.
And that takes us to the last reason why they're unexpected costs. And that's this, because
you didn't read your annual notice of change. Folks, this happens all the time. Let me explain
the annual notice of change. The annual notice of change will be mailed to you right when
the open enrollment period begins for Medicare. Medicare has an open enrollment period every
year between October 15th and December 7th. This is a seven week period of time. In any
plan that you're on that's only written for one year, which are drug plans and advantage
plans. Those plans have the right to change anything they want in that plan from year
to year. And so they have to disclose to you what they're changing, and that's the purpose
of this annual notice of change. So we call this the ANOC. And so what happens is they
mail the ANOC to you right before October 15th, and we encourage you to open it up.
Many people don't open it up; you see, they assume because they like the plan this year,
they'll like it next year. Folks don't assume that because you may be wrong, because those
plans have the right to change anything they want. They just have to disclose it to you.
So that's why you open up your ANOC, and what you're looking for is this: you're going to
look to see have they changed my premium? And usually they don't change it much. But
that can happen where there's a drastic increase. Actually, this year we had a plan go up 150
percent.
But it happens. Number two, I'm looking at my formulary. I'm going to make sure that
all my meds are still covered. In other words, did they drop any of your medications? And
that's why you got to open up, to make sure your meds are still covered. And then, a third
thing they can do is they can re-tier a medication. You may be on a medication one year to tier
two and they bump it to a tier four. Or maybe you're on a medication in the tier three and
they bump up to a tier five. And when they make a tiering change, that can drastically
increase your out-of-pocket copay. All right? So that can be surprising. And so don't assume
just because you like it this year, you're gonna like it next year. Open the annual notice
of change; see what they're doing. There's an 85% chance that you will like it, but there's
a 15 percent chance that you will not like it because they've made a change or maybe
you've made a change to your medications and you actually need to get a different formulary.
And so those are the five reasons why people have unexpected prescription drug costs. And
I would encourage you, work with someone that understands this whole system and can make
sure that you are on the prescription drug plan that is best for your needs.