Medicare Part D: How to Avoid Bigger Bills

Illustration by Christoph Niemann

As Americans tighten their belts in a scary economy—facing layoffs, mortgage foreclosures and loss of health insurance—Medicare beneficiaries on fixed incomes are also anxiously wondering how affordable their health care will be next year.

On the plus side: Medicare Part B premiums, covering doctor visits and outpatient services, will not rise in 2009 but will stay at the 2008 level of $96.40 a month. And Social Security benefits will go up by 5.8 percent, the largest cost-of-living increase in 26 years.

The bad news is that the premiums and copayments of many Medicare Part D plans, which cover prescription drugs, will be more expensive for most enrollees next year unless they take action to find a less costly plan during open enrollment, which ends Dec. 31.

Consumer advocates urge enrollees to look carefully at how the costs and benefits of their current Part D plan will change for 2009 and compare them with other plan options to find the best deals.

Typically, only a minority of Part D enrollees bother to compare plans at the end of each year. But this year, in a greater financial crunch, many more may find it worthwhile—if only to avoid a nasty surprise on Jan. 1, when they could find their current plan costs a lot more than it did this year. At the very least, experts say, enrollees should look at their plan’s “annual notice of change,” sent out in October, which details all changes in premiums, deductibles, copays and coverage benefits.

Not all plans will raise premiums and copays next year, and a few will actually reduce them. But independent analyses of Part D “stand-alone” plans—those that offer only prescription drugs and in which most beneficiaries are enrolled—show that the great majority will hike costs, often substantially so. (These analyses don’t include Medicare Advantage plans, which cover both drugs and medical care.)

Hikes in premiums and copays

The 10 largest stand-alone plans, which include two AARP-branded United HealthCare plans, will raise premiums in 2009 by 8 to 63 percent, according to the Washington-based research consulting firm Avalere Health. Another analysis, by the Kaiser Family Foundation research group, found that nationwide only 22 percent of stand-alone plans will have monthly premiums below $30 in 2009—compared to 40 percent in 2008—and just under one in four plans will cost $70 a month or more.

The Humana Standard plan, the nation’s second most popular plan, with more than 1.5 million people enrolled, is a key example of the difference four years can make. In 2006 its average monthly premium was $9.51 (with enrollees in seven states paying only $1.87 a month). In 2009 it will be $40.83—a 329.3 percent increase, according to Avalere Health.

Next year Humana Standard will change its cost sharing, too. Until now, its enrollees have paid a straight 25 percent of their drug costs before they hit the coverage gap. In 2009 they’ll pay 15 percent for preferred generic drugs, 25 percent for preferred brands and 40 percent for all others. That means lower costs for people whose generics are on the “preferred” list, but a big increase for those with meds in the third tier. For example, Humana Standard enrollees taking the cancer drug Gleevec—the full price is $3,415.44 a month—now pay $854 a month in the initial coverage period. In 2009 they’ll pay about $1,366. Some other plans are raising enrollees’ share of costs for the most expensive drugs from 25 percent now to between 33 and 50 percent.

An AARP Bulletin analysis of Part D stand-alone offerings for 2009 focused on Florida. It found that consumers can choose from plans costing between $16.70 and $111.30 a month—with 48 out of the available 54 plans raising premiums. In the biggest hike, the Quality Rx plan’s premiums go up from $20.10 this year to $69 in 2009.

Thirty-three plans in Florida will shift more costs to Medicare beneficiaries by one means or another. Typically they will widen the gap between the inexpensive drugs—mainly generics—they prefer enrollees to use and other more costly medications. Floridians who use generics will have a choice of 15 plans with zero copays, up from 13 this year. But 28 plans will charge at least $70 per monthly prescription for more expensive “nonpreferred” drugs (up from 17 in 2008), and nine will charge copays of $90 or more for them.

Fewer choices for some

One casualty of raised premiums is that people with limited incomes who qualify for zero premiums under the Extra Help benefit will have fewer plans to choose from. Medicare rules say these beneficiaries must be in plans with premiums under a certain amount to get the full benefit. While five to 12 such plans are still offered in most states for 2009, Arizona will offer just two plans, and Nevada only one. Nationwide, an estimated 1.3 million people on Extra Help will be transferred to other plans unless they choose to stay in their current plan and pay part of its higher premium.

Doctors are concerned that as costs rise, more beneficiaries will cut back on their medicines. They already see it happening to patients who fall into Part D’s coverage gap.

The unpopular gap—the “doughnut hole”—is a suspension of coverage after the total cost of the drugs an enrollee has used in any one year exceeds a certain amount ($2,700 in 2009). After that point, enrollees must pay 100 percent of the cost until their out-of-pocket spending on drugs since the beginning of the year reaches $4,350. Then low-cost catastrophic coverage kicks in until the end of the year.

Thomas Weida, M.D., a family physician in Hershey, Pa., and a professor at Penn State University’s medical school, recalls a diabetic patient who stopped his drugs when he hit the gap and a month later was hospitalized with out-of-control diabetes. “He could have died,” Weida says.

In 2009 at least 11 plans in each state will cover some generics in the gap. But many brand-name drugs have no generic alternative, and only three stand-alone plans—one each in Florida, Michigan and Wisconsin—will offer a “few” brand names, according to Medicare.

Still, more enrollees could avoid the doughnut hole by choosing lower-cost drugs from the beginning of the year, Weida says. In January or February, many of his patients opt for costly brand-name drugs instead of the generics, he says, not understanding that their coverage will run out in six or nine months. His advice: “Start planning in January, so that hopefully you won’t get hit by the doughnut hole later in the year.”

Where to go for help

Beneficiaries can go to Medicare’s Drug Plan Finder at www.medicare.gov to find out how much they’ll pay under any Part D plan next year by entering their specific drugs, dosages and how often they take them. The plan finder also suggests generics or older brands that reduce costs.

Doctors and others who help beneficiaries struggling to afford drugs in the doughnut hole often advise them to take advantage of the $4 prescriptions for generics now offered at many supermarket pharmacies, or to apply to manufacturers’ patient assistance programs for free or low-cost supplies of brand-name drugs.

With the economy in a nose-dive, the number of people looking for help (the uninsured, the underinsured and Part D enrollees in the doughnut hole) is rapidly increasing.

Among people applying to the drug manufacturers’ patient assistance programs for free or low-cost supplies, “there was about an 11 percent jump between the first of July and the end of September,” says Ken Johnson, senior vice-president of PhRMA, the drug companies’ trade group. “In some states that are experiencing really troublesome times, like Michigan, Ohio and Pennsylvania, we’ve seen increases of 15 to 25 percent among people looking for help.”

NeedyMeds.com, a 12-year-old website that offers information on many sources of assistance in paying for medications, normally receives around 9,500 hits a day, says its founder, Richard Sagall, M.D., of Gloucester, Mass. “Over the past few months, I’d say its gone up by 300 to 500 a day,” occasionally hitting the 11,000 mark.  A new listing of free and low-cost health clinics, he adds, has rapidly become “one of the most popular pages on the website.”

Patricia Barry is a senior editor at the AARP Bulletin.