As Medicare drug premiums soar, it's time to shop around
CHICAGO (Reuters) - Premiums for many popular Medicare prescription drug plans will soar next year - but seniors don't have to take the rate hikes lying down.
The annual plan enrollment period for Medicare Part D starts October 15 and runs through December 7, so seniors have time to shop around. Seven of the top 10 plans will have double-digit percentage increases next year, according to Avalere Health, a healthcare consulting and research company. More than 80 percent of Part D beneficiaries are in these plans; Avalere data shows that 5.9 million will pay double-digit increases next year if they don't switch. That's a whopping 29 percent of all Part D enrollees.
The double-digit premium hikes are surprising because prescription drug costs have fallen sharply due to widespread expansion of generic medications - not to mention that many seniors had been expecting their costs to go down since healthcare reform closed the so-called donut hole gap in coverage.
Humana WalMart Preferred Rx, for example, shows the largest average rate hike among the top 10 plans - 23 percent, from $15.10 to $18.50. The plan made a big splash in the market when it was introduced two years ago, offering a very low premium and very low co-pays for enrollees who use its preferred pharmacy options on commonly prescribed medications. At $18.50, Humana WalMart still will be offering the lowest average monthly premium among the top 10 plans.
A Humana spokesman said the company based the new premium on "what we expect it will cost to administer the benefit for our members, including the previous year's cost experience, anticipated future cost trends and the impact of benefit changes such as increased coverage in the gap." He also noted that the low co-pays remain in place.
But what may also be happening is that now that Humana's plan is established, it is getting rid of its introductory rates.
"Once you have an enrolled base, it does benefit you to raise prices," says Dan Mendelson, Avalere's CEO.
Luckily for seniors, there are new plans coming onto the market this year with more low introductory rates aimed at building market share. A new entry, UnitedHealth's Medicare Rx Saver Plus, is offering a $15 premium, for example.
What's more, many seniors will find good deals by enrolling in Medicare Advantage plans - the managed-care alternative to traditional fee-for-service Medicare, which often include drug coverage. Premium growth for those plans will be very modest next year, and benefit offerings will be stable. Many offer enhanced drug benefits, including zero-deductible plans.
Market trends aside, it's critical for seniors to shop for a plan with their individual needs in mind. A low premium may not be the best deal if the plan doesn't cover an individual's particular drugs, or if co-pays are higher.
Here are key tips aimed at helping seniors navigate the prescription drug and Advantage markets this fall:
1. Check the details
Beyond the monthly premium, it's critical to check a plan's formulary - the rules under which a drug is covered. For example, a plan might state that a drug is covered, but only after the insurance company has quizzed the ordering physician about alternative medications, a process that could delay prescription fulfillment by weeks or even months. Also, pay attention to how much a plan charges for the drugs you know you will need, along with the co-pays.
Many plans are working to keep costs down by establishing "preferred delivery networks." That means enrollees must agree to receive their drugs through a specific retail or online pharmacy network. If your plan has a network, make sure its delivery method works for you.
3. Mind the gap
The Affordable Care Act gradually closes the prescription drug "donut hole" - the nearly $4,000 gap where seniors have to cover 100 percent of their costs. In 2013, the gap starts when spending hits $2,970 and then coverage resumes when it reaches the "catastrophic" level of $6,733. Enrollees will receive a total discount on brand name drugs in the gap of 52.5 percent next year, and the discount on generic drugs will rise from 14 percent 21 percent.
4. Extra help
Low-income seniors can receive assistance with their Part D premiums through a program called "Extra Help," which is administered through the Social Security Administration. The subsidy can defray thousands of dollars in costs, and in many cases eliminate prescription drug expenses entirely for participating seniors.
Individuals with annual income up to $16,755 will qualify for the Extra Help program in 2013 ($22,695 for a married couple) and up to $13,070 in resources ($26,120 for a married couple). Resources that count toward the total include stocks, bonds and bank accounts
Many low income seniors will need to change plans this year. Only low-cost plans are permitted to participate in the program, and the large rate hikes among the top plans means that many won't qualify to participate in 2013. Medicare will automatically re-enroll many of these seniors in other plans, but it's also possible to shop for the plan of your choice.
5. Medicare Advantage
The Medicare Advantage market presents fewer shopping challenges than the prescription drug program this year. Premiums will rise an average of 5 percent next year, Avalere reports, and the number of plan choices is rising in most parts of the country.
Still, average figures can't tell you if an Advantage plan is right for you. If you're in a plan this year, start by reviewing the annual notice of change, which should have arrived by September 30th. But also go online to review the details - especially the prescription drug component.
(The writer is a Reuters columnist. The opinions expressed are his own. For more from Mark Miller, see link.reuters.com/qyk97s)
(Follow us @ReutersMoney or here. Editing by Beth Pinsker Gladstone and Gunna Dickson)
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