Medicare Part D and Prescription Drug Changes in 2016

Avoid Medicare Mistakes that could cost $8000+!

As the summer comes to a close, we start to prepare for the next annual enrollment period for Medicare, which begins on October 15 (and ends December 7).
 
During this period, we HIGHLY recommend individuals on Medicare review their Part D prescription drug coverage and ensure they are in the correct drug plan.
 
Do not assume your current prescription plan is the best plan for you in 2016.
 
Here’s why…


An $8,000+ Mistake… Avoided
A couple of years ago, we had someone come into our office for assistance with their Medicare coverage.  Let’s call him John.  After we setup the right Medicare supplement coverage for John, we moved on to the Part D prescription plan discussion.  John had ten prescription drugs, and he was extremely adamant about a particular drug card since his neighbor had spoken highly of this particular drug card. (Let’s call it Drug Card 1 for analysis below).  We explained that each individual is different and it is imperative to select the right coverage based on an individual’s list of prescriptions.  There was still some resistance.
 
Then we showed John the analysis (from medicare.gov) based on his drug list.
 

• Drug Card 1 (monthly premium $39.20) – the total annual cost for this card would have been nearly $13,000!  Three drugs were not covered in the formulary, which means John would have had to pay the full retail costs for these drugs for the entire year!

• Drug Card 2 (monthly premium $98.30) – while the premium was significantly higher, the total annual cost for this card was approximately$4,800 since all of his ten drugs were covered in the formulary.

 
(There was actually another drug card, same insurance carrier as Drug Card 1, that would have been $16k / year!)
 
Needless to say, we were able to convince John that Drug Card 2 was the right card based on his needs.  He was extremely happy and continues to be pleased with our service.  He contacts us each year during Annual Enrollment to review his Prescription drug card and ensure he has the right plan.
 
Medicare Part D and Prescription Drug Plans change each year, so it is critical to review during the annual enrollment period so you can avoid a mistake that could cost you thousands of dollars per year!


Medicare Part D Changes Annually

Each year, Medicare changes the benefits provided under Medicare Part D.  These changes will most likely impact your annual costs for your Prescription Drug Coverage.  Specifically in 2016, here are some key changes for Medicare Part D.

• Initial Deductible: will be increased by $40 from $320 to $360 in 2016.

What does this mean for you? The initial deductible is the ‘first dollar’ spent on your prescriptions.  Certain plans will have a $360 deductible, which means that the individual will have to pay their first $360 in drug costs before the benefits start.  Other plans may offer a $0 deductible, which means that the benefits start immediately.
 

• Initial Coverage Limit:  will increase from $2,960 in 2015 to $3,310 in 2016.

What does this mean for you?  The initial coverage limit protects individuals from the dreaded “Donut Hole” (aka Coverage Gap), which requires must higher out-of-pocket costs.  After the total retail drug cost exceeds the initial coverage limit, the individual will fall into the Donut hole.
 
By increasing the initial coverage limit by $350, individuals are less likely to hit the Donut Hole, which is a very good thing.

• What you Pay in the Donut Hole: for Brand Name drugs, this will remain at 45% in 2016.  For Generic drugs, this will decrease from 65% to 58%.

 
What does this mean for you?  In most cases, this won’t have a material impact.  Since generic drugs are generally less costly than brand name drugs, this 7% generic drug cost reduction will not likely have a major impact.  (In 2017, the brand name drug cost will drop from 45% to 40%, which should have a larger impact on cost reduction.)
 
See this link for more details on changes in future years.

https://www.medicare.gov/part-d/costs/coverage-gap/more-drug-savings-in-2020.html

• Out-of-Pocket Threshold: will increase from $4,700 in 2015 to $4,850 in 2016.

 
What does this mean for you?  In most cases, this won’t have an impact.  Less than 5% of people actually reach this threshold.  Catastrophic coverage benefits start when someone exceeds the Out-of-Pocket threshold. 
 
In Catastrophic coverage, individuals will pay a much lower fee for their drugs – either 5% of the drug cost or a specific co-pay amount, whichever is greater.

• Generic Drugs Copay in Catastrophic Coverage– increasing from $2.65 in 2015 to $2.95 in 2016
• Brand Name Drugs Copay in Catastrophic Coverage – increasing from $6.60 in 2015 to $7.40 in 2016

 
By increasing the Out-Pocket threshold by $150, an individual will need to pay an additional $150 in the donut hole before reaching the reduced cost of drugs in the Catastrophic coverage.
 
 
All of these Medicare Part D changes in 2016 will have an impact on selecting the right Prescription Drug Card.
 
 
Prescription Plan Part D Changes Annually
In addition to the Medicare Part D changes, the insurance companies change their Prescription drug plans each year.  These changes could impact the formulary (which drugs are covered), deductibles, premiums, etc.
 
It is imperative to select the right plan EACH YEAR to avoid the type of mistake mentioned above by John, which could result in thousands of dollars of unnecessary costs!
 
There are 40+ Medicare Part D Prescription plan options and we strongly recommend using the tools on medicare.gov and/or contacting a trusted insurance broker to assist in this process.
 
 
A FREE Service offered to our clients…
We feel very strongly about ensuring our customers have the correct Prescription Drug Card and thus, we provide the option for all of our customers to have their Prescription Drug coverage reviewed annually.  We do not receive commission on these transactions.  This is purely a service that we offer to ensure our customers have the most cost-effective coverage.
 
If you have any questions about Medicare Part D, Annual Enrollment, or any general Medicare questions, please give us a call at 856-866-8900 or contact us on our website at www.senior-advisors.com