Some Will Pay Less But Will Others Pay More?

Pick up a publication, turn on the TV, and you’re likely to find something like this.

“Inflation Reduction Act Continues to Lower Out-of-Pocket Prescription Drug Costs for Drugs with Price Increases Above Inflation”

Or this.

“FACT SHEET: Seniors Across the Country Are Saving Millions of Dollars in Health Care Costs Because of President Biden’s Prescription Drug Law”

The Inflation Reduction Act (IRA) is going to have an impact on Medicare Part D prescription drug costs. Two significant changes are already in effect.

1. Insulin: All insulins covered under Part D, whether injected or administered by pump, are capped at $35. Just to get an idea of the savings, 3.3 million beneficiaries with Part D coverage in 2020 spent $1 billion out of pocket on insulin.
2. Part D vaccines: There is no copayment for vaccinations, such as shingles (known as Shingrix), hepatitis B administered to non-high-risk individuals, DTaP (diphtheria, tetanus, pertussis), RSV (respiratory syncytial virus) and others. Don’t tell those who got their shingles shots last year. They probably paid about $400.

Wave good-by to the 5% coinsurance

Then, as of January 1, 2024, there will be a very big change. The IRA eliminates the Catastrophic Coverage coinsurance. Most probably have no idea what this means and how it applies to them so here’s a very quick review.

Whether you have a stand-alone drug plan or a Medicare Advantage plan that covers prescription medications, Part D drug coverage has four payment stages or phases.

1. Deductible: This is the amount you pay for certain drugs before the plan starts covering its fair share. Plans can charge from nothing up to the maximum, which will be $545 in 2024.
2. Initial Coverage: These are costs you pay after meeting the deductible or if the deductible does not apply. This is the stage where most drug plan members spend the year.
3. Coverage Gap: Commonly known as the donut hole, this stage begins when total drug costs (what the drug plan member and plan have paid) reach the threshold, which will be $5,030 next year. Because of discounts, plan members pay 25% of the cost of a drug.
4. Catastrophic Coverage: Once reaching the threshold, which is the total of the beneficiary’s out-of-pocket costs plus the value of discounts in the donut hole, there is a 5% coinsurance. In 2024, the threshold will be $8,000, and the coinsurance disappears. There will be no out-of-pocket costs in this stage.

Here are two examples that demonstrate the cost-savings impact.

• A drug advertised on television treats psoriasis and psoriatic arthritis. In Milwaukee, once hitting Catastrophic Coverage, a person would pay almost $1,100 a month. No coinsurance next year will save over $12,000.
• Another TV drug to treat allergies and sinus problems has a $200 monthly cost in stage 4. Come January, that will be gone with an annual savings of $2,400.

And these savings will likely increase over time. As the retail cost of a drug increases so does the 5% coinsurance a drug plan member must pay.

Inquiring minds want to know

According to Kaiser Family Foundation, Part D drug plans will cover the 5% coinsurance next year. That’s over $14,000 for the two examples above.

A recent ASPE Office of Health Policy research report noted that 1.5 million drug plan enrollees (4% of those not receiving extra help) who reach Catastrophic Coverage will save about $3,100 in out-of-pocket costs. That adds up to $4.65 billion in costs that drug plans, not the plan members, will pay, and one big question: What impact will that have on the 96% of enrollees who don’t reach stage 4? Time will tell.

The same old message

Every fall, I share the same guidance but given all the upcoming changes to Part D drug costs and coverage, it’s more important than ever. You need to pay attention during the Open Enrollment Period (OEP) that starts October 15.

• Open and study the Annual Notice of Changes. You should have received it by now. If not, contact your plan.
• Focus on Section 1, Changes to Benefits and Costs for Next Year, especially the prescription drug cost changes in Section 1.3.
• Determine the impact on your costs and coverage.
• If a new plan will work better or save money, enroll in it by the end of November. (I know that the OEP ends December 7. But past client experience shows that those who wait until the end usually run into some issue. And ancient wisdom suggests that what is left ’til last is often left undone.)