Why It's Crucial to Optimize Clients' Medicare Drug Coverage Plan (Part D)

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For clients on Original Medicare, their Part D coverage is the one part of their coverage they can easily change each year during Open Enrollment. Clients often ask “Why should I bother?” To which I say, because prescribed medications can and often do change year over year; but more importantly, plan costs, as well as drug costs themselves, can change dramatically year over year. Medicare estimates fewer than 3 out of 10 beneficiaries evaluate their drug coverage yearly, which can be a costly mistake. Especially for clients on high-cost, brand-name medications. But for all of your clients on Medicare, the annual Open Enrollment prescription drug plan review is an opportunity to update their healthcare plan and projected costs for the next year, and avoid the mistake of inertia.

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The Cost of Prescription Drugs

About 90% of all medications dispensed from a pharmacy have generics available, but generic drugs account for only 18% of all drug spending. The remaining 10% of medications and 82% of costs come from brand-name drugs. These are the drugs that are often advertised on television and in marketing brochures in doctors’ offices — and they usually come with hefty price tags. The United States is one of only two countries in the world that allow direct-to-consumer advertising for prescription medications. And that advertising often touts offers to “pay no more than $5 per prescription” copay assistance programs. What they don’t advertise is that Medicare beneficiaries aren’t eligible to use those programs. 

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These brand-name drugs are offered in almost all drug classes: for skin conditions, asthma, diabetes, and eye problems. Sometimes they represent a significant clinical advancement. Sometimes they are more simply an “improvement” over more frequent dosing or potentially fewer side effects. But they are always more costly than the older drug they replace. 

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Newer oral medications to treat cancer, multiple sclerosis, rheumatoid arthritis, and other auto-immune conditions are the Porsches of brand-name drugs, often with no alternatives, costing five figures and more for annual treatment. 

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There’s an old adage that what gets measured gets paid attention to, and this is true for prescription drugs. During the HealthPlanning Analysis process, seeing the annual costs for a prescription drug inspires many individuals to talk to their doctor about the medications they’re on to determine if there are lower-cost alternatives.

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But what’s especially important to understand is that because of the higher costs of these brand-name drugs, the insurers that offer Medicare drug plans don’t cover every FDA-approved medication in their plan; they cover a few in each category, enough to give prescribers clinical options. This is referred to as a formulary. Because drug pricing changes, the insurer may change what they cover each year, as well as what they charge for it in order to optimize their financial performance.

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Real-Life Case Study

Here’s a case in point. A HealthPlanning Analysis for a 67-year-old client, taking several common generic drugs but one expensive brand medication, Taltz, for an auto-immune condition showed that for 2022 the plan that optimized her overall drug costs (using her preferred pharmacy) would have out-of-pocket expenses of $15,593.31. This isn’t an insignificant expense, but one that the client and her financial planner had foreseen and accounted for in her financial plan since she will likely be on this medication for some time. 

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She hadn’t felt inclined since initially enrolling in Medicare to make changes, but her 2023 HealthPlanning Analysis showed that keeping the same plan for 2023, with the exact same medications, would result in out-of-pocket expenses (premiums plus drug costs) of $91,648.56. 

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Yes, $91,648.56. 

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An alternative plan showed that annual expenses for 2023 would be $6,864.29. This is a change worth exploring.

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Too often when clients choose to stay with their existing plan without a HealthPlanning Analysis, they don’t realize the mistake they’ve made until they get a call from their pharmacy in January. But by then, it’s too late. While they won’t be married to the plan for the rest of their lives, it will be a year before they can make a change.

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Other concerns that are worth evaluating are the plan premiums and deductibles themselves. In 2023 for example, Part D plan deductibles will increase 5% to $505 annually before the plan begins cost sharing. It’s also a good time to evaluate income changes that impact IRMAA surcharges, which increase drug plan premiums. While IRMAA surcharges are calculated from the tax return two years prior, assessing opportunities to reduce taxable income can also impact healthcare planning scenarios.

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Final Thoughts

Medicare Open Enrollment, from October 15 through December 7, is the best time to conduct a HealthPlanning Analysis to quantify these opportunities for cost optimization. Reviewing your CRM for clients that are 64 and older can start a lifelong habit of incorporating healthcare planning into your planning calendar. If you aren’t already partnering with Caribou to offer healthcare planning to clients, contact us today to see how you can start optimizing clients’ Medicare drug coverage — and every part of their financial well-being impacted by healthcare costs.

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