Most people had group health coverage through their employers before Medicare, and two or three options were available during the annual enrollment period. Apart from covering your prescription medications, you probably didn’t place much importance on drug coverage in your decision. As soon as you joined Medicare, all of that changed.
With so many options under Part D, shopping for prescription drug coverage can be difficult. On average, 23 stand-alone Part D plans are available, and 31 Medicare Advantage plans include drug coverage and 50 or more options in some areas.
Choosing the lowest premium may seem the most straightforward option, resulting in a higher bill. Over a year, many Medicare beneficiaries can save money by paying a higher monthly premium.
In terms of total costs, there are three factors to consider.
- The cost per drug tier: There is typically five-tier drug coverage. The cheapest generic drugs belong to Tier 1. There is an increase in price with each tier, Tier 5 being the most expensive. Each plan determines what drugs are included in each tier and how much you’ll pay. Generally, Tier 1 and Tier 2 medications require copayments, usually flat dollar amounts like $1 or $10. In Tier 4 and Tier 5, coinsurance, or a cost percentage, is generally charged. Depending on the plan, tier 3 can be a copayment or a coinsurance.
- The retail price and copayments or coinsurance: How much you pay depends on the retail price and copayments or coinsurance.
- Medicines subject to the Part D deductible: Tier 2 medications are subject to the same deductible as Tier 1 medications. Consequently, drug plan members can pay up to $480 this year instead of a flat copayment in plans with higher premiums and no deductible.
Comparing dozens of drug plans is not something anyone wants to do. While choosing the lowest-cost plan seems the simplest solution, it won’t yield the best results.
Instead, try out one of the features of the Medicare Plan Finder. When you enter your drugs and pharmacies, you’ll see a link with each plan labeled “Estimated total drug and premium cost.” Click on the link for more information. The Plan Finder can predict your premiums and cost-sharing (your out-of-pocket costs when refilling a prescription) for the rest of the year, beginning in September, if you are looking for a drug plan next month (in August). There is no guarantee that the lowest premium will result in the lowest cost.
Affordable Part D plans are an excellent addition to drug coverage. The lowest premiums were pushing $20 just a few years ago. Many questioned whether Medicare drug coverage was needed by people who didn’t take medications. The average premium today is around $7. The plans will work fine if you don’t take drugs or only a few generics. Taking low-cost plans may not be good if you take more expensive medications.
In the long run, paying more up-front in premiums can save money. There is a tendency for higher-premium plans to treat expensive drugs better. You don’t need to be afraid to explore your options; just remember to check during the Open Enrollment Period.