Joanne (00:00):

Deductible, Initial Coverage, Donut Hole, TrOOP. What does any of this have to do with Medicare prescription coverage? Well, in today's episode, we will help you understand how all these phases of Part D coverage work and how they may impact you throughout the year. 

Cameron (00:13):

And as always, before we start, my name is Cameron Giardini and together with my co-host Joanne Giardini-Russell, we operate Giardini Medicare, which is an independent insurance agency based out of Southeast Michigan. And although we are based in Michigan, we do work virtually over the phone to directly help consumers in about 13 different states to find the right Medicare coverage for them. So, if we do not work in your state, we will connect you with another trusted independent agent that will be able to help you find the coverage you want. And even if you choose not to work with us, we know that the information in today's podcast will help you have a successful and stress-free transition to Medicare. So just briefly, I want to mention what we will discuss more in detail in today's episode. We're going to talk about the four different coverage phases of Medicare prescription coverage that Joanne just mentioned in her intro.

Cameron (01:01):

And we will talk about how you can understand and track the phases of coverage for your specific situation. We will talk about how you can save money during different phases of Part D prescription coverage. And just one quick disclaimer before we get into things. Keep in mind that all of the coverage phases that we talk about in today's episode, do apply to both Medicare Part D and Medicare Advantage plans. So, if we just mention Part D, just know we are also talking about both coverage options and this does apply to Medicare Advantage, often called “Part C.” So, with all that out of the way, I'll have Joanne start and talk about the deductible, which is usually the first phase of prescription coverage.

Joanne (01:40):

It’s likely the easiest part. So, this is the first phase of coverage and in 2022 the maximum part D deductible is $480. And in 2023, it's going to increase to $505. Now, not all plans will have the maximum deductible amount. There are lower premium plans that typically are going to have a higher deductible and higher premium drug plans might have a lower deductible. However, we're cautioning people to try and fixate less on the deductible amount and more so on what medications you take that are impacted by that deductible being in place. Many plans exclude low-tier medications from the deductible. If you have a low-cost generic, you might pay a copay instead of the full price even at the beginning of the year during that deductible phase. So, how does the deductible work? We're going to use an example here and we're going to use a plan that has a $505 deductible on tiers three through five. So, a tier two medication as an example will have a retail price of $20 and a copy of $5. In this case, even with the deductible, you would pay a $5 copay right away instead of the full $20 retail price.

Cameron (02:52):

And keep in mind that not all tier two medications are exactly $20 retail price. That's just an example of course,

Joanne (02:58):

Nor are all tier twos the same on every plan too. It could be a different tier, and that's where it gets confusing. Let’s use a tier 3 example. So, you might have a tier 3 medication, the retail price is $200 and you might have a copay for the plan of $40. In this case, you would have to pay the full $200 retail price until the full deductible is met and then the copay begins. 

Cameron (03:19):

Basically, two and a half months’ worth of payments to meet that deductible before the copay,

Joanne (03:24):

Right? Remember that having no deductible is not always better. Just because you're looking at plans and you find one with no deductible, don't always assume that it's better. It's very possible that your monthly premium will increase quite a bit to get a Part D plan with zero deductible, there's always some cost shifting. So, we'll walk you through more of what to look at with these plans.

Cameron (03:44):

Yeah, that's important to bring up because there are people out there who'll see a plan with no deductible, and it might be $70 a month just as an example. Whereas a plan with a deductible is only $10/month. So, with a $505 deductible, you're really paying more in premiums just to avoid the deductible in the first place. And, just to mention it, with Medicare Advantage plans, it is much more common for those plans not to have deductibles on their prescription coverage. So, just keep in mind that if you see a lot of $0 deductible advantage plans, that is accurate. I think some people get kind of mad when you say it, but Medicare Advantage plans usually have better prescription coverage than standalone Part D. I'm sure you would agree. 

Joanne (04:26):

mm-hmm. In general.

Cameron (04:26):

Yeah. And then after you get out of the deductible phase of coverage, or if you don't have a deductible, then you go to the initial coverage phase. Once you're in the initial coverage phase, this is basically when you will have to pay different copays or co-insurance for prescriptions based on the medication tier. And Joanne mentioned it briefly, but all tiers are different with different companies. You know, one company might have a medication at tier two, and another company might have that same medication at tier one or even tier three. So to find all that information, you can always go to medicare.gov or look at the plan's formulary or of course ask an independent broker and just say, based on all my medications, what tiers are they at? With that being said, as an example, for a tier one medication with a $0 copay in the initial coverage phase, you would pay $0.

Cameron (05:14):

You pay the copay. Now if there's a co-insurance that is a percentage (co-insurance is just a fancy term for percentage basically). A tier four medication, a much higher tier is more likely to have co-insurance. So if you have a 40% co-insurance and you have a $200 retail medication, you would pay 40% of $200, which is $80 in that case. And again, that is during the initial coverage phase. And then how long do you continue in the initial coverage phase? This continues until you reach what's called the initial coverage limit. Once your total retail cost of prescriptions reaches the initial coverage limit of $4,430 in 2022, and it's going up to $4,660 in 2023, you'll transition from what's called the initial coverage phase to the coverage gap, which is also known as the “donut hole” that we will talk about in more detail next.

Cameron (06:12):

If you do have a lot of expensive medications, the initial coverage limit is super important to understand since this is the sole determining factor as to whether or not you'll reach the dreaded donut hole, also known as the coverage gap. So, the limit applies to the retail cost of all the covered prescriptions that you are getting filled through your prescription drug coverage. It does not matter what you're actually paying out of pocket for the prescription. All that matters is the retail price. You might be paying a small copay, but the retail cost, as we talked about, is much higher and you're getting closer to that initial coverage limit much sooner than expected. As a quick example, if any of you are out there, have taken Eliquis as a prescription, or know of somebody with Eliquis, this is a good example because it's very common for people to reach their initial coverage limit without even realizing they are going to. 

Cameron (07:00):

And the reason for that is that the retail price for Eliquis is around $500 per month. Now, this is not exact, but just use that as a number for this example. But a copay for Eliquis, it's often a tier-three medication. So, you might pay, $40 per month on the average plan. Every time you go to the pharmacy, you pay $40 per month for Eliquis. However, $500 is going in that bucket going towards that $4,660 initial coverage limit. So if you're doing the math on that $500 a month, you're going to reach the initial coverage limit before the end of the year. Now you can always listen to our donut hole episode for much more detail on how this initial coverage limit is calculated and how you actually reach it.

Joanne (07:42):

All right, we're onto phase three, which is called, the donut hole, technically called the coverage gap. But most people get a little paranoid about the donut hole. We do dive into the donut hole in much greater detail in our Donut Hole podcast episode, so make sure you go there and listen to that if you want to learn more about how the coverage gap really works. Essentially when you are in the coverage gap phase of coverage, you're going to pay 25% of the retail cost of your prescriptions. Therefore, so many people are worried about the donut hole since some medications can become much more expensive if you reach this phase. Here are a few examples, a tier-one medication, and what you would be paying in the coverage gap phase for that tier-one medication. With a $5 retail price, it would be $1.25. If you had a tier four medication with a $200 retail price, you would be paying $50 during this stage. Tier five specialty medication could be a $2,000 retail price. The price you're going to pay is $500 during this coverage gap phase. This does not mean that all your prescriptions will become much more expensive, but certain high-cost medications will likely increase in price during this phase.

Cameron (08:45):

Just to highlight again what Joanne was just talking about, regardless of the tier of medication, you are paying 25% of the retail cost. So, it's not that every one of your prescriptions becomes much more expensive like she said, but there are a couple of key ones you'll likely have to look out for. Even going back to Eliquis, as I said, that one is a $500 retail cost. In the donut hole, you might go from a $40 copay up to $125 in that instance. And then lastly, once you get out of the donut hole or the coverage gap, you enter what is called catastrophic coverage. So, one thing we didn't really talk about in our Donut Hole podcast is how you get out of the donut hole and how you move into that final phase of coverage. So we'll go into that in a little bit more detail now.

Cameron (09:29):

So, getting out of the donut hole, all comes down to one thing, which is called the true out out-of-pocket cost, also known as the TrOOP for short. So normally we say that Medicare is not that complicated or it's not as complicated as it seems. Well, this is definitely not one of those times, this is complicated. So in 2022, the true out-of-pocket limit is $7,050. And in 2023 it is going to be increased to $7,400. Now, this is important. This does not mean that you will have to pay $7,400 out of your own pocket before leaving the donut hole to enter catastrophic coverage. Here are the costs that will go toward your true out-of-pocket limit. They are the amount you pay towards your deductible. So, if you pay the full $505, that full amount goes towards your true out-of-pocket limit. Also the copays and or co-insurance for your prescriptions during your initial coverage phase.

Cameron (10:23):

So with Eliquis, if you have a $500 retail price, but you are paying $40 for a copay only the $40 copay is going towards that true out-of-pocket limit. So, the $500 retail that's going to get you into the donut hole, but getting you out is only the $40. You can see where it's not weighted evenly. Now other than that, 95% of the cost of your brand-name medications in the donut hole will also count towards that true out-of-pocket limit. This is the 25% that you pay out-of-pocket as well as a 70% manufacturer discount that is added to what you pay. And then last but not least, the 25% you pay for generic medications while in the donut hole will count toward your true out-of-pocket limit. So again, this is very confusing. We know that it's something that we'll have to make a more updated YouTube video on it. We do have an older version where the concept is still the same, and the numbers are a bit outdated, but if you want to understand the troop and how it's calculated, if this is a concern to you, just reach out to us and we can help you in more detail.

Joanne (11:26):

I just envision a lot of people hitting rewind there because it is confusing. So again, something to point out if you're on some tier two or tier one medication and things like that, don't worry about the donut hole. Don't feel you need to fully understand it, but obviously if you're on Eliquis and more expensive medications, you should understand how it works. Another couple of tidbits, medications that are not on your plans covered a list of medications, which is also called the formulary, as well as your plans. Monthly premiums do not count towards the true out-of-pocket for the year. We're going to link a couple of different articles in the show notes that highlight how the different phases of part D coverage work since we know it can be easier sometimes to read and visually see things versus listening to this kind of information.

Cameron (12:04):

Yep. Just some other stuff to go along with the future video that I have to make <laugh>. So, with that all being said, Joanne can talk a little bit more too about how you can track what phase of coverage you're in throughout the year in case this is a concern to you.

Joanne (12:17):

Yeah, this is important to do too. You should take a look at the insurance plan. They're going to send you an explanation of benefits, an EOB, and you should be looking at that, and it'll show you how much you have paid out through the year, and it'll show you which Part D phase of coverage you're in, how much you've spent on your covered prescriptions so far. And this should be mailed to you or be available online also using your plan online member portal. But do keep in mind that all the phases of prescription coverage only apply to prescriptions that are covered by your plan's formulary. Non-formulary medications are excluded from anything that we talked about in this episode. Unless you request and get approved for a formulary exception. When you do an analysis of your prescriptions and your costs on medicare.gov, you should also get the same cost estimates for whether or not you're projected to reach certain phases of coverage throughout the year.

Joanne (13:04):

This is going to give you a rough idea of what to expect for the year, but it's certainly not one hundred percent accurate. But do note on the reports, tell you month by month what your expected costs will be. And it does say right on there, whether you will reach the coverage gap in July or August, so do pay attention to those reports. And the last thing to know, know that the phases of Part D coverage restart on January 1st of every year. No matter what stage of coverage you are in on December 31st, you'll be starting from scratch and January of the following year.

Cameron (13:31):

Yeah, that's always a big thing. Even if you just started Medicare or if you just started your prescription coverage for the first time, let's say you turn 65 in October, it still starts over January 1st.

Joanne (13:41):

No exception, which is a bummer. Always a bummer for people with expensive medications.

Cameron (13:44):

Yep, it’s unfortunate. Now, if that does apply to you and, and you're bummed out that you must start from scratch or you know you're in the donut hole and you need help with some of these prescription costs, we'll give you a couple of different examples here. But you can always use coupon services. A lot of people are familiar with GoodRx. There is also Simple Fill, there's Clever Rx, there's, gosh, there's so many of them. A lot of agents will say to avoid GoodRx because they sell your data to people, but they typically have the lowest costs.

Joanne (14:13):

They all sell your data. Yeah,

Cameron (14:15):

They don't really care. Everyone's got your data

Cameron (14:16):

Based on every phone call you're getting during open enrollment everyone already has your information. You can also talk to the manufacturer of the medication directly and see if there are any manufacturer discounts. I know Xarelto has one that is pretty popular. Also, you can go to needymeds.com. They will let you search pretty much all of the manufacturer discounts for a specific medication. So, that can be a really good source, especially for expensive medications. But don't expect all medications to have that, especially ones that aren't as expensive. Also, if you're open to generic instead of brand name medications, if there truly is a viable alternative that your doctor thinks is okay for you, that can be a pretty simple switch and solution. There are also cost-plus drugs and other online medication providers.

Cameron (15:05):

Cost Plus Drugs is Mark Cuban's company that just came out and it's basically one where they charge the cash price for certain medications plus a markup so that they can profit a little bit off the top. And then finally, there is Low Income Subsidy or “Extra Help”, which is actually a federal program from Social Security and the federal government based on income that can help you with expensive prescription costs. But you do have to qualify based on income and asset levels. Let's see, basically, if you have your insurance in place, just do whatever it takes outside of your insurance to get the medications cheaper than what you are getting with your copays. This is where a broker like ourselves or somebody else can come to help you look at options to figure out what else is out there besides just calling an insurance company.

Cameron (15:50):

So, as you can tell, the different phases of Part D coverage are basic. But truly understanding how your prescriptions and out-of-pocket cost can cause you to move through these phases can be very complex. Luckily, there are simple solutions for how to track your Part D spending as we highlighted in this episode. And a good insurance broker can help you understand how this can and will impact you. With all that being said, please leave us a review on your podcast app and subscribe for future episodes. If you want to ask us questions directly, please email us at info@gmedicareteam.com or give us a call at (248) 871-7756 or schedule a call on our website, gmedicareteam.com. But this time of year during the open enrollment, please just send us an email. It's much easier for us to get to. So thank you and have a good day.