If I could show you how to save money on your Medicare prescription drug plan, would you be interested?
You have an opportunity to possibly do so during Medicare’s annual election period – better known as open enrollment.
Regardless of which name you use, this is the period between Oct. 15 and Dec. 7 when Medicare beneficiaries can elect to change prescription drug plans, change Medicare Advantage (Part C) plans, switch from original Medicare to Part C, and vice versa. Changes you make are effective Jan. 1.
Last week, I wrote about why and how to be a careful shopper when you’re looking at Medicare Advantage plans. I used an enticing offer I received as an example. Today, I’ll do the same about your prescription drug coverage.
A tempting Medicare drug plan renewal offer
Each year at this time, Medicare prescription drug plans (and MA plans) are required to send their enrollees an “annual notice of change.” It’s a document that shows a side-by-side comparison of changes in premiums, copays and benefits between those in the current year and those for the new calendar year. Plan members can and should look at the notice to consider whether a particular plan is still the best one for them.
My wife received the notice from her drug plan, which said that her monthly premium for 2024 would be dramatically dropping to 40 cents. The total premiums for her prescription drug insurance would fall to $4.80 for the entire year. To get that premium, she needed to do nothing. The plan would automatically renew at the lower rate.
The insurance companies that sell the drug plans are counting on human nature to take the easy way and do nothing and just stay put.
Is that a good deal?
Sometimes, what looks like a good deal really isn’t when you analyze it. Unfortunately, too few Medicare beneficiaries take the time to analyze their drug insurance. According to a study by KFF (formerly known as the Kaiser Family Foundation), only 27 percent of those enrolled in a Medicare stand-alone prescription drug plan compared the costs of their plan’s drug coverage with the drug coverage offered by other plans in their area.
Medicare prescription drug plans are sold by private insurance companies. They get to set the premiums, copays, deductibles (up to the Medicare maximum) and which drugs they will cover. The choices available to enrollees and the cost depend on the state in which you live. The number of stand-alone plans ranges from 15 in New York to 24 in Alabama and Tennessee. The monthly premiums for 2024 range from $0.0 (that’s correct – zero) in several states to $195.10 for a plan in Pennsylvania. The deductibles range from zero to $545 (the maximum allowed by Medicare).
It’s important to understand that there’s more to choosing a plan than just the premium and deductible. People tend to assume that because something is more expensive, it must be better. That doesn’t apply to drug plans. Likewise, a cheaper premium does not necessarily mean a better deal.
When choosing a drug plan, you also have to consider the copays, whether all of your medications are covered, pharmacies in the plan’s network, and the plan’s star ratings.
While it’s important to look before you leap (to a new Medicare plan), you also need to look before you just stay put when it comes to your prescription drug coverage.
How to analyze and compare drug plans
Analyzing drug plans can seem overwhelming. That’s why so few consumers do it. But a tool on the official Medicare website makes it doable for most of us, and it has become easier to use in the last few years.
There is a prominent button on the front page of the site that takes you to the Medicare Plan Finder. You just click that to get started.
The plan finder will ask you some preliminary questions, including your zip code (plans and costs vary depending on where you live) and the kind of plan you want. It will also ask if you receive any government financial assistance from any of several programs. After answering those questions, the plan finder will take you to a page where you enter the names of the prescription medications you take along with dosage and frequency.
After you’ve entered your medications, the next page allows you to click on the pharmacies near you. It’s important to select several, even some you don’t normally use, because the results will vary by pharmacy.
Using the personalized Medicare plan finder tool
Based on your answers, the website will then analyze all of the plans and sort the results from least to most expensive plans for your specific situation. It shows what you would pay in total annual out-of-pocket costs when you combine premiums, deductibles and copays. That’s the important number – your total annual cost.
It allows you to set up a side-by-side comparison of several plans. You can look at a plan’s details to be sure that all of your medications are covered, whether there are any restrictions on a particular drug (such as quantity limits), and which pharmacies will be the least expensive.
It will also show you the quality star rating (out of five stars) the plan has earned from the Center for Medicare and Medicaid Services. I don’t recommend choosing a drug plan with fewer than three stars.
If you like what you see and want to enroll in a particular plan, Medicare makes it easy to do so online right from the plan finder. It’s also far easier to enroll in a drug plan this way than by phone. Furthermore, enrolling in the new plan will automatically discontinue your old plan on January 1 without any further action on your part.
Analyzing my wife’s drug plan renewal offer
My wife and I analyze our prescription drug plan coverage every year during the annual election period. We have changed plans several times and saved money by doing so. Here’s what she found by using the Medicare.gov plan finder:
While her current plan’s new premium went down to only 40 cents per month, the copays for her prescriptions had gone up. With the new premium and copays, her current plan will no longer have the lowest total cost. For 2024, there are two different plans that would have a lower total out-of-pocket cost for the year. The least expensive one for her has a monthly premium of $15.80. Even a plan with an $82 monthly premium would actually be cheaper for her. But we wouldn’t have known that without going through the analysis.
That’s not to suggest that there is anything wrong with the 40-cent per month plan. In fact, that’s the one that shows the lowest total cost for my prescriptions.
I’m going to repeat: When it comes to choosing a Medicare prescription drug plan, you can’t just go by the monthly premium or the deductible.
Be careful of misleading websites
When you do the analysis, remember: Use only the official Medicare website to do your drug plan analysis.
Other sites will lead you to insurance companies and brokers pushing their products. In fact, if you have a prescription drug plan that was sold to you by an insurance agent, you really should use the plan finder. Most insurance agents only represent a limited line of drug plans and may not necessarily offer the lowest-cost plan for your specific medication situation.
The Commonwealth Fund has done studies on how insurance agents influence the choices made by Medicare beneficiaries. One study said that insurance brokers and agents can earn much higher commissions for enrolling people in Medicare Advantage plans and found that “commissions for stand-alone Part D plans were viewed (by agents) as too low and not worth the time.” It went on to say, “Low commissions don’t incentivize brokers and agents to help people in traditional Medicare reevaluate their Part D plan each year.”
Free help finding a Medicare prescription drug plan
There is a free, unbiased source of information and help that is not influenced by insurance company commissions. The State Health Insurance Assistance Program (SHIP) is a federally-funded program with branches in every state. Use the above link to find your local SHIP office. There, you can receive personalized help to find and enroll in the best drug plan for you.
The bottom line
Medicare beneficiaries have until Dec. 7 to review and possibly change drug plans. Whether you switch or stay put, make sure your decision is an informed one. (Abe Wischnia, Consumer Rescue)