Part D Savings Continues, Especially For Cost-Conscious Consumers

While the average Medicare beneficiary enrolled in a Part D prescription drug plan (PDP) will continue to see savings for the next decade, beneficiaries will still have to be careful consumers to get the most savings.

CMS released an analysis that showed that Medicare beneficiaries with high prescription drug costs may save more than $18,000 from 2010 to 2022 if they have enrolled in a PDP. An analysis of PDP plans by Avalere Health, however, shows that seven of the current top 10 PDPs will have double-digit increases in their premiums for 2013. The primary reason for potential savings for beneficiaries is that under the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) the coverage gap–or “donut hole”–is gradually closing from now until 2022.

The donut hole is the gap in prescription drug coverage offer by a PDP that was part of he original Part D program, put in place to reduce the cost of the legislation that was enacted in 2003 that included Part D. Under the original benefit, as Part D beneficiaries accrued drug expenses, they first had to satisfy a deductible, then 75 percent of their drug costs were covered up to a certain dollar amount. Then, the donut hole kicked in, a coverage gap where the beneficiary was responsible for 100 percent of drug costs. When total out-of-pocket spending reached a specific maximum, the PDP then provided 100 percent coverage for any additional drug costs.

Provisions of PPACA are gradually closing the donut hole. In 2013, standard Part D coverage will include a $325 deductible and 25 percent coinsurance for prescription drug costs between $325 and $2,970. Beneficiaries will pay 100 of the prescription drug costs above $2,970 until they have spent $4,750 out of their own pockets. Then, the PDP coverage continues again.

Each year between now and 2022 the out-of-pocket maximum will decrease for Part D beneficiaries.

According to CMS, seniors with Part D plans who fell into the donut hole saved an average of $641 in the first eight months of 2012, compared to what they would have paid if the coverage gap was not decreasing. Total savings includes $195 million on diabetes prescriptions, over $140 million on drugs to lower cholesterol and blood pressure, and $75 million on cancer drugs.

The total savings per beneficiary varies by state, ranging from $850 for New Jersey residents to $351 for residents of Hawaii.

Some of that savings will be offset by higher premiums. Similar PDPs are offered by private insurance companies in different regions of the country. While all PDPs have to offer the same minimum coverage, some plans offer expanded benefits, for a higher cost, of course.

The Avalere Health analysis showed that Humana Wallmart’s Prefered Rx Plan raised its premium on its popular low-cost plan by 23 percent for 2013, to $18.50 per month. Premiums for First Health Part D Premier, first Health Part D Value Plus, and Cigna Medicare Rx Plan each increased by more than 15 percent. Overall, seven of the ten most popular PDPs have double-digit premium increases for 2013.

PDPs will have a total enrollment of about 17.5 million beneficiaries in 2013. The three most popular PDPs–covering almost 9 million people–had an average 3 percent increase in premiums from 2012 to 2013. The most popular plan–AARP MedicareRx Preferred PDP–increased its monthly premium 1 percent, from $39.85 to $40.42. Overall, average Part D premiums for existing PDPs increased 6 percent from 2012 to 2013.

The Avalere study noted that because of premium increases, half of the most popular PDPs will lose eligibility for low-income subsidies in some parts of the country.