Open Enrollment is on now through December 7. This is your chance to review your drug coverage. If you see Part D drug plans that charge a coinsurance, instead of a copayment, proceed with caution.
Cost sharing basics
To understand the coinsurance issue, let’s begin with the costs Medicare beneficiaries pay for medications.
A premium is the amount you pay every month for the coverage. Stand-alone Part D drug plans charge premiums. In 2023, premiums will range from $4.40 (in some areas) up to $100 or more. Most Medicare Advantage plans include drug coverage and there may or may not be a premium.
After you’ve paid your premium, there is cost sharing, the amount that comes out of your pocket for covered drugs. Cost sharing includes the following costs.
- The deductible is the amount you pay for covered medications before the drug plan starts to pay. In 2023, the Part D standard deductible will be $505. Plans set their own deductibles, up to the standard amount. Plans also determine which drugs are subject to the deductible. In many plans, that’s Tier 3, Tier 4 and Tier 5 drugs. (A tier is a category of drugs for payment purposes.)
- A copayment is a fixed amount, such as $5 or $47, for a covered drug after meeting the deductible.
- Coinsurance is a percentage of the retail cost that you would pay. For example, drug plans can charge a coinsurance of 25% to 33% for Tier 5, specialty drugs.
Coinsurance can cost more
A coinsurance can increase your costs dramatically. Here’s an example of what can happen and why Open Enrollment is so important.
In her current plan, Annie pays $42 a month for her eye drops, a Tier 3 medication. Reviewing her Annual Notice of Changes, she saw that next year the plan will charge a 25% coinsurance for Tier 3. The Medicare Plan Finder notes the current retail cost for her eye drops at her favorite pharmacy is $775. She would pay $194; that’s 25% of the retail cost of the drug, over $150 more than she pays this year.
Here’s a fact of life with a coinsurance. If the retail cost of the drug increases, you’ll pay more for the drug. A report from the AARP Public Policy Institute found that 75 of the top 100 brand-name drugs increased their list prices between the end of December 2021 and the end of January 2022; none of the top drugs experienced a list price decrease. The cost sharing that people use to select plans in December was already out-of-date by the time they got their first refill in January.
Tips for Open Enrollment
• Check out the different plans available to you, the tiers of your drugs, and whether the plan charges a copayment or coinsurance. To uncover this information, go to the Medicare Plan Finder and follow the instructions to enter drugs and pharmacies. Click on Plan Details and View More Drug Coverage (toward bottom of the page) to see the costs per tier. Clicking on the pharmacy links will tell you the Retail Cost that determines your cost sharing if the drug charges a coinsurance.
- Look for a plan that charges a copayment, instead of a coinsurance, if at all possible. Your costs won’t increase during the year. Annie is switching plans to one that charges a $47 copayment for her drug. An added benefit: Her premium will also go down.
- When coinsurance is a fact of life, check what plans charge. For example, one plan’s coinsurance is 45% compared to 50% in another plan.
- Then check the retail cost of the drug at different pharmacies. A medication used to treat a skin disorder is a Tier 3 drug with a coinsurance of 17%. The retail cost at one pharmacy is $111.57; the beneficiary cost sharing would be $19 a month. At a second pharmacy, the retail cost is $10.17 with a cost sharing of $1.72.
- Consider setting up an emergency fund to cover the costs associated with a coinsurance.
- If your cost sharing increases during the year, check other plans and pharmacies during the Open Enrollment Period.
You may not be able to avoid a coinsurance. But, if you do your homework during the Open Enrollment Period, you probably can save some money next year.