Welcome to Medicare School Daily, where we help you understand Medicare, save money,
avoid mistakes, and above all, get the most out of your Medicare benefits. Now, most are
not aware of this, in fact, sometimes even shocked by this. But you realize that you
will spend more money on medication costs than anything else in health care. Now, that
may not be your present situation, but statistically, that is true. And therefore, if that's the
case, we have to make sure that we're on the right drug plan. So choosing the right drug
plan is critical for your Medicare coverage. Now, to make sure that you're on the right
drug plan, you have to understand those plans and really understand how they're structured,
because Medicare plans are structured differently than anything you've had before. And they're
different than individual plans. They're different than group plans. The reason for that is because
Medicare plans have four stages. I'll explain what that means. So let's make a quick comparison
between what you're accustomed to on individual plans and group plans - those of you that are covered
at work. We would call those non-Medicare plans meaning you're less than 65 years old,
you're not on Medicare yet. So non-Medicare plans actually have two stages, which means
your out-of-pocket cost can vary two times. You sometimes have to reach a deductible.
Once you've met the deductible, then we move over to the second stage, which is co-pays.
And these are very reasonable cost co-pays. And once you're here, then your co-pays will
be fixed all year. So from January to December, you may never see your copay change throughout
the year. You've met a deductible if you have it. If
you don't, that's waived. We pay co-pays, which never changes. And that's typical of
individual and group work plans. Now, Medicare actually has four stages, and this is what
makes them confusing. Most plans start off with the deductible; some waived, but most
have it. Once we've satisfied the deductible, then we go to co-pays. Once we're done here now,
our co-pays can actually change two more times. So our co-pays can change during the year
a total of four different times. And so I'm going explain the different stages of Medicare
plans. Now, stage number one is the deductible stage. Now, Medicare sets the deductible every
year, it usually goes up a little bit. This year, it's $435.
Last year it was $415, so they raised up a little bit. They typically will continue
to do that. But in this particular stage here, what you're paying is the retail cost or just
the tiered cost of the medication. It varies from plan to plan. But let's just say you're
taking two medications. Let's say you're taking something for your cholesterol, very common today
called Atorvastatin, it's a generic lipitor. That typically is a tier-one medication at
a $2 copay. And let's say you're taking something for your thyroid, most people that are
taking a brand name are taken Synthroid. Others are taking generic or taken levothyroxine,
very common medication. Again, typically a tier-one, very low cost, maybe $2 copay.
So let's say that we're in this stage here. We go to the pharmacy and pick up our prescriptions
and they're two dollars a month. What are we spending every month for meds? Four dollars.
And 4 dollars times twelve is 48 dollars. And if that's all I spend on my meds
for that year, forty-eight dollars, will I ever reach my deductible? And the answer
is no. And if you never reach your deductible, you will stay in this stage the whole year.
And by the way, that's probably 80 percent of you. You're not on a lot of meds or the
meds that you're taking a very low-cost meds, And so you'll stay in stage one the entire
year. Now, some of you, though, however, you're going to meet your deductible and you may
meet that deductible very quickly. Let's give an example of someone that's taking Eliquis
or maybe Xarelto, some expensive medication that retails for $500 a month.
Well, absolutely you're gonna meet your deductible the very first time you
pick that medication up. So that deductible will be satisfied if that retail cost is at
435 or above. So once we reach the 435, now we're done in this
stage. If we ever get there, again, only about 20 percent are going to move on. But if we
reach the number, then we go to stage two. We call that the copay stage. Now it is here
where you're very accustomed to drug pricing because it will always be based upon the tier
of the medication. Every medication covered by the plan will
be given a tier number. And with that tier number, that establishes what your co-pays
are going to be. So let's go back to my Eliquis or Xarelto example. It's always a Tier three
preferred brand medication. By the way, these tier one and tier two are typically, not always,
typically generic. And these are going to typically be your brand name medications. So
that Xarelto or Eliquis is going to come in somewhere about a 50 dollar copay.
So you're paying about 10 percent of the actual retail cost. And so every time you get a prescription
filled in this stage, why are we here? Because we met our deductible. Now we're here and
we're simply paying co-pays. Now, here's where things change. Every time you get a prescription
filled in this stage, every time. Medicare behind the scenes is tracking the retail cost,
the retail cost. You're not paying retail, but you are paying a copay. And the difference
between what you're paying and the retail costs, the insurance plan that you chose is
covering the difference. Medicare tracks, retail, what you're paying, what the plan's
paying. So that total retail cost, if it ever reaches a certain number called the threshold.
And that threshold number changes every year. This year it is $4,020.
Now, may I remind you, you did not pay that. This is your co-pays based upon tiering and
the balances paid by the insurance company. But this is the total retail cost.
Now, just so you know. Ninety five percent of all people on Medicare plans will not reach
the threshold. Only five percent of people reach that. Now, listen, I have two ladies
right now that are on seven thousand dollars a month medication. They reach that in three weeks.
If you're an insulin-dependent diabetic, you're taking Novellus, Humalog, Lantus, some
of those a quick pen type of insulins, you're going to reach that in somewhere probably
between on average, two to four months. And again, ninety five percent of you will never
reach it. But if you're on expensive medications or maybe lots of medications, you may eventually
reach that. But whenever you do, if you ever do. Now, we're done in this stage because
we've reached the threshold. So that takes us to stage number three. Now, in this stage,
this is called the donut hole; Medicare called the coverage gap. But here we have
a different copay cost. And that copay cost to us is going to be based upon the retail
cost of medication. So, again, if I'm on that Eliquis or Xarelto at five hundred dollars retail
a month, I'm going to pay 25 percent of that. So what's twenty five percent of five hundred
dollars? $125. So now my out of pocket cost is $125
for any medication that I'm taking while in the donut hole. Now, what's happening?
Again, they're tracking the cost of medication. And so if that next number ever gets to $6,350
And by the way, it has nothing to do with this
number. This is a brand new number. And just so you know, only one percent of the Medicare
population will ever see that particular number. Most people who get in the donut hole, just
stay here paying twenty-five percent the retail costs. But if we ever reach $6,350,
then we're done in this particular stage and we move to the
final stage, which is called catastrophic coverage. Now, by the way, anyone who gets
here is very happy because medications are very inexpensive. And so now your copay is five
percent of the actual retail cost of the medication. So what's happening? Five percent of that
five hundred dollars would be twenty-five dollars. And so you can see now that that
medication has changed four times. We had to meet a deductible. We had to pay our tiering
price. If the threshold was reached $4,020 of retail costs, that moves us in the
donut hole. Now we're paying $125 copay at 25 percent of all other medications.
And if we ever reach $6,350, then we're moving on to catastrophic, where
now we pay a very low cost of $25 for that same medication that changed four
times. Now this is where you're going to stay until the end of the year, because what's
going to happen is once we had December 31, we get the January one, we start all over
and we work our way through these stages. So as you can see, prescription drug plans
are structured differently than anything you've had before. And it's critical that you are
on the right drug plan. If we can help you further, go to MedicareSchool.com and we can teach you more about this. But it's important that you have the right drug plan. Thanks so much for watching.