MEDICARE PART D HELPS retirees pay for their prescription drugs. But these prescription drug plans have a variety of out-of-pocket costs that vary based on the policy you select. Here are some of the medication costs you can expect in retirement.
The average Medicare Part D premium was $41 per month in 2018, up 11 percent since 2015, according to a Kaiser Family Foundation analysis of Centers for Medicare & Medicaid Services data. However, premiums vary significantly based on the plan you select. Among widely available Part D plans, premiums ranged from $20 to $84 per month. Some Part D plans increased their premiums by more than $10 per month in 2018, and a few plans had slight decreases in premiums.
The majority of Medicare Part D plans (55 percent) have a deductible before medications will be covered. Most plans with deductibles charge the maximum possible deductible of $405 in 2018, but some plans (9 percent) charge a smaller deductible. About 45 percent of Part D plans don’t have a deductible. “Plans can change a deductible, which is the amount that people have to pay out-of-pocket before the plan coverage begins,” says Juliette Cubanski, associate director of the Program on Medicare Policy at the Kaiser Family Foundation. “Some plans don’t have a deductible, and some plans charge less than that standard $405 amount.”
Medicare Part D plans have a formulary, or list of covered medications. These medications are typically grouped into tiers that have different costs for plan participants. Medications in the preferred generics tier frequently have low copays of a median of $1, and sometimes drugs on this tier have no-copay. Drugs on the non-preferred generic tier generally have slightly higher copays, and medications on the preferred brand name tier have much higher copays of a median of $37. “Most enrollees pay under $40 for preferred brand drugs,” says Aditi Sen, an assistant professor of health policy and management at the Johns Hopkins Bloomberg School of Public Health in Baltimore. “Non-preferred brand drugs are likely to be much more expensive.”
Retirees who need to take medications classified as non-preferred brand name drugs or specialty drugs often need to pay coinsurance, or a percentage of the price of the medicine. “An issue with coinsurance is that people’s actual out-of-pocket costs will depend on the underlying list price of the drug,” Cubanski says. “They might not know how much they will be paying out-of-pocket until they actually go to fill their prescription.” Those taking non-preferred brand name drugs typically need to pay between 35 and 45 percent of the cost of the medication.
Retirees who require expensive specialty drugs are often required to come up with 25 or 33 percent of the cost themselves. “Coinsurance can be very high for specialty drugs, leading to retiree costs in the hundreds of dollars per month,” says Julian Reif, assistant professor of finance and economics at the University of Illinois. The Centers for Medicare & Medicaid Services defines specialty drugs as those that cost at least $670.
Prescription drug plans often don’t cover medications that can be purchased without a prescription that some seniors depend on. “Things not included are vitamins and most over-the-counter medications,” says Becky Briesacher, an associate professor of pharmacy and health systems science at Northeastern University in Boston. “My research finds these types of medications may be burdensome to someone with Medicare Part D coverage.”
Medicare Part D plans are allowed to change their lists of covered medications each year. A drug that was covered in the past may not be covered at all in the future, or could be shifted to a tier with higher costs. “Part D plans have different formularies, so the most important thing retirees should do is check to ensure that their drugs are covered by the plan,” Sen says.
Medicare beneficiaries can use the Medicare Plan Finder tool to find out which plans in their area cover their medications and how much they are likely to pay out-of-pocket under each option. “Retirees can use this resource to check that the medications they need are covered by the plan’s formulary and whether their drugs are on the formulary’s preferred tier, which means they will pay less out-of-pocket,” Sen says. “Retirees can also use the Plan Finder to compare estimated annual costs for each available plan – taking into account premiums, deductibles and cost-sharing – so that they enroll in the most appropriate plan.”
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