2024 Medicare Part D: Some Surprises
Despite its detractors, access to outpatient drug coverage beginning in 2006 through Medicare Part D, 40 years after original Medicare was launched, was of great value. Even before the donut hole was closed, Part D offered more protection than what an individual could buy with Medicare supplements H, I and J which all included some drug coverage at that time. But, many people had no drug coverage at all which was terrible and, frankly, a disgrace. Nevertheless, it is remarkable that something positive inflicts so much misery due to its convoluted benefit design, number of products offered, range of premiums and, more recently, network pharmacy issues.
Our advice with respect to Medicare Part D has generally been to sit tight if you’re taking relatively affordable drugs, your medications are all on your Plan’s formulary, your pharmacy is in-network and you are pleased with the Plan’s customer service. After all, changing coverage is disruptive so be informed but don’t consider changing plans for small dollar savings. No one knows what they’ll actually be prescribed in the future.
On the other hand, our advice has always been to review your situation if you’ve been prescribed a drug that’s not on the formulary or you’re taking expensive medications.
Now that 2024 information is available, however, we think more people should look at their Part D options this year although what we are seeing varies significantly depending on where you live.
First, there are more premium increases associated with moderately priced plans than in the past. The trend in average premiums over the last several years has generally been downward due to the government allowing deductibles to be higher every year. In 2023, the maximum deductible is $505 and in 2024 it will be $545.
The Medicare Part D benefit design has always included a Deductible, followed by Initial Coverage, then a Coverage Gap, and finally a Catastrophic Coverage threshold. There was no limit or out-of-pocket maximum that one could spend in a year on their drugs. One reason we may see higher average premiums for 2024 is that for the first time, Part D will have an absolute out-of-pocket threshold.
Through 2023, those who reached the Catastrophic Level, defined as an insured’s out-of-pocket cost of $7,400 in 2023, owed 5% copayments after reaching that phase. Even though individuals would see their copayments plummet when reaching the Catastrophic phase, 5% of an expensive drug could still be costly. Those who reach this level don’t actually spend $7,400 out-of-pocket due to the nature of brand name discounts at play in the coverage gap but it was still a significant yearlong expense. However, in 2024, what has historically been referred to as the Catastrophic Level becomes a true out-of-pocket maximum of $8,000. Again, in practice, people aren’t spending $8,000 due to the nature of manufacturer’s discounts but eliminating coinsurance for those with expensive drugs is very significant. In 2025, the out-of-pocket maximum is $2,000 so one would expect more substantial premium increases as a result.
Returning to a discussion of 2024 options, Wellcare is offering zero premium plans in some states and drastically reduced premiums in others. This is totally counterintuitive and, of course, we have concerns. Many might find a zero premium plan so attractive that Wellcare is overrun with new applications and service suffers. There is also the possibility that their objective is to significantly grow membership and then increase premiums substantially in the next year or two. We can’t know.
If your situation isn’t too complicated, you can learn to use the tool on medicare.gov yourself. Go to the home page, then Find and Compare and then Find Health and Drug Plans. You enter all your specific information about your prescription medications and preferred pharmacy and your options will be displayed for you. Again, you shouldn’t feel compelled to do anything but in such an unusual year, you just might want to see for yourself how options may have changed.
When we recommend a drug plan, we look to have all one’s drugs on the formulary, a formulary of about 3,000 listed drugs or more, that one’s preferred pharmacy is a preferred pharmacy with the Plan and a star rating of at least 3 to 3.5. New to the website tool this year is also a warning about Plans that have received low ratings over the last several years. The rating system is far from perfect but please do not enroll in a Plan with a rating of 1.5 stars.
Our country has chosen, deliberately or not, a torturous, convoluted way of dealing with drug coverage for those on Medicare. There are simply too many choices to be helpful but as with everything else concerning coverage, you want to make a sound decision. Remember, open enrollment closes on December 7, 2023 for a January 1, 2024 effective date.
Thanks so much.