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4 Potential Medicare Part D Pitfalls and How to Avoid Them

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Watch Out for These Difficulties

Understanding Your Enrollment Periods is Important

You cannot enroll in Medicare Part D plans anytime throughout the year like you can with a Medicare Supplement insurance Plans, so it’s important to understand your rights and responsibilities with regard to enrollment in your drug coverage.  

Typically you have 90 days prior to and 90 days after your 65th Birthday in which to enroll in Medicare Part D.  If you have group insurance through an employer and are over the age of 65, you will typically only have 63 days from your qualifying event to select a drug plan if you’re coming off the group plan in retirement.  

If you miss this initial enrollment period for your part D, you will be locked out and unable to purchase a plan until the start of the Annual Enrollment Period, otherwise known as AEP. AEP starts on October 15th and the effective date would not be until January 1st of the following year, so it’s always a good idea to find a good Medicare Broker to consult with regarding your enrollment.  

For those of you who are already enrolled in Medicare and over 65, the only time one can make a change to or purchase a part D plan is during this AEP.  AEP will begin on October 15 and will end on December 7th.  

Even if you do not take any medications or the medications you do take are low cost drugs, it would be wise to take out a part D plan in order to avoid potential penalties for late enrollment and to protect yourself from unexpected illnesses requiring expensive treatment and medications.  

There are Penalties for Late Enrollment, so Stay Informed

Many Medicare patients fail to realize there are significant penalties for late enrollment into a Medicare Part D drug plan.  In fact, Medicare imposes a 1% commulative penalty for each month you do not have credible prescription drug coverage under Medicare!  This can add up to a large sum of money down the road and can totally be avoided by enrolling on time.

Late Enrollment Example

Mrs. Martinez is currently eligible for Medicare, and her Initial Enrollment Period ended on May 31, 2015. She doesn’t have prescription drug coverage from any other source. She didn’t join by May 31, 2015, and instead joined during the Open Enrollment Period that ended December 7, 2017. Her drug coverage was effective January 1, 2018.

In 2018, since Mrs. Martinez was without creditable prescription drug coverage from June 2015–December 2017, her penalty was 31% (1% for each of the 31 months) of $35.63 (the national base beneficiary premium for 2018) or $10.86. Since the monthly penalty is always rounded to the nearest $0.10, she paid $10.90 each month in addition to her plan’s monthly premium.

The Monthly Penalty Math

.31 (31% penalty) × $35.02 (2018 base beneficiary premium) = $10.86

$10.86 rounded to the nearest $0.10 = $10.90

$10.90 = Mrs. Martinez’s monthly late enrollment penalty for 2018

In 2019, Medicare recalculated Mrs. Martinez’s penalty using the 2019 base beneficiary premium ($33.19). So, Mrs. Martinez’s new monthly penalty in 2019 is 31% of $33.19 or $10.29 each month. Since the monthly penalty is always rounded to the nearest $0.10, she pays $10.30 each month in addition to her plan’s monthly premium.

The Late Enrollment Penalty Math

.31 (31% penalty) × $33.19 (2019 base beneficiary premium) = $10.29

$10.29 rounded to the nearest $0.10 = $10.30

$10.30 = Mrs. Martinez’s monthly late enrollment penalty for 2019

Part D Formulary Changes Can Affect You Tremendously

Each year part D plans can go to Medicare and request formulary changes.  This means the Medications your taking this year that are covered under your plan may not necessarily be covered under the same tier structure next year, or worse yet, might not be covered at all.  

Each year Medicare requires your part D provider to send to you a formulary notice which contains all the medications that are covered under the plans’ formulary. It’s important to cross reference this book each year.  Otherwise, you may go to the pharmacy in January to fill your medications to discover one or more of your drugs are no longer covered under your plan.

At this point in January it would be too late to enroll in another more cost effective drug plan effectively locking you out of making a change for the remainder of the year.  The only exception to this rule would be if you are low income. LIS beneficiaries can actually change part D drug plans throughout the year, but everyone else is limited to a special enrollment period or the Annual Enrollment Period for standalone part D drug plans.

Be Aware of the Dreaded Donut Hole

The good news is the coverage gap under all Medicare D plans, known as the “Donut Hole”, is being phased out at the end of 2019.  So, in 2020 there will be no more Donut Hole.

But, it is important to plan ahead for 2019 and have a good understanding of what your drugs costs will be and if you will approach or breach the threshold for the coverage gap.  A great resource for you is: www.medicare.gov  where you can estimate your total spend for your medications each year and shop from several Medicare Part D providers in your area.  

If you don’t want to take the time to sort through all this information, one of our licensed agents will be happy to assist you in this regard.  It’s important to have your medication list ready when you call as this will expedite the process tremendously.

Knowing whether or not you’ll go into the donut hole for 2019 can make a big difference and will prepare you for what lies ahead with respect to your annual spend in 2019 and beyond.  If we know in advance your likely hood of crossing into the donut hole we might be able to avoid it all together using some techniques we have cultivated over the years.

Not knowing where you stand, however, can wreak havoc on your finances and blind side you with higher costs when you least expect it.

It is Not Just the Price that Counts

Many people on Medicare only look at the price of the part D prescription plan when making their purchasing decision and fail to take into account other factors affecting the costs of Medicare Part D.

Of utmost importance is the total out of pocket spend for the year over the monthly plan premium because this total spend accounts for premiums, deductibles, co pays, potential coverage gaps, and catastrophic coverage.  In other words the total spend is a summation of all your prescription expenses including premiums.

Each part D drug plan’s formularies vary with respect to Tier placement and price. So the drug plan that has a low monthly premium might look appealing on the surface.  However, upon close inspection you may discover the plan has a deductible along with a much higher copayment than another more expensive part D plan.

We use software that tracks the total spend and places each drug plan in order from best to worst in terms of this total spend and can consult with you on which plan might suit your needs the best based on the medications specific to you.  An example of this seeming contradiction is below:

Out of Pocket Example

Marlene is looking at two different RX plans, one with a 20.00 monthly premium and the other with a 50 dollar monthly premium.  At first she considers enrolling in the cheaper plan. However, Marlene consults with one of our AHIP certified agents to review both options.

She soon discovers the 50 dollar plan to save her more money over the course of a year because it has no deductible, and the medication Marlene currently takes is one Tier level down under the 50 dollar plan.  The net effect is a 356 dollar net savings for the year under the 50 dollar plan!

Monthly plan premium          20.00               Monthly plan premium 50.00

Annual Drug Deductible       410.00               Annual Drug Deductible 0

Tier Cost of Medication          74.00 co pay    Tier cost of Medication 30.00 co pay    

Total Annual Cost                      1,316.00                                                       960.00

Enrolling in the 20 dollar plan would have cost Marlene a considerable amount of money more when factoring all the other expenses involved under the two drug plans.  Please let us know if you have additional questions or would like a quote for your Medicare plans.