Retirement

The Inflation Reduction Act Has Made This Year’s Medicare Open Enrollment More Important Than Ever

Do an internet search on the Inflation Reduction Act. You’ll find several sites that mention deficit and carbon emissions reduction, investment in domestic energy production, and Medicare prescription drug negotiation. Buried somewhere in the text of the act is one change that will have an immediate impact in 2024: the elimination of the 5% coinsurance in the Catastrophic Coverage drug payment stage.

Most probably have no idea what this means. Briefly:

The question is how

If drug plans have to pay that much next year, what will this mean to the other 49 million with drug coverage who will not reach Catastrophic Coverage? Now that the Medicare Plan Finder includes 2024 plans, I decided to spend a little time to see whether I could get some answers. (A little soon turned into a lot of time.) I compared the 2023 and 2024 plan details for 65 Part D stand-alone drug plans in one ZIP code in three cities: Fort Lauderdale, Los Angeles, and Milwaukee. (This year, there are seven plans that won’t be around in 2024.)

Before sharing some of the discoveries, know that this is not a scientific study, and the findings are not statistically significant. Rather, I wanted to identify any changes and figure out how much a change might cost you, the drug plan member. My objective: Convince every Medicare beneficiary to review drug coverage during this year’s Open Enrollment Period.

Cost sharing

As could be expected, there were some significant changes in cost sharing, the share of costs covered by the insurance company that you pay out of pocket. Once you’ve paid your premium and met any deductible, these two costs are the most important.

  • Copayment: This is a predetermined amount, such as $5 or $47, that does not change during the year. Tier 1, preferred generic, Tier 2, generic, and some Tier 3, preferred brand, drugs charge a copayment.
  • Coinsurance: This is a percentage of the retail cost of a drug. Some Tier 3, most Tier 4, non-preferred brand, and all Tier 5, specialty drugs charge a coinsurance. These costs can change during the year if the cost of a drug increases, which is generally the case.

I reviewed the “Costs by Drug Tier,” found on the plan details page and here are some findings.

Plans are increasing the copayment. Four plans are raising the copayment for Tier 1 by $1-$3 and 13 plans, Tier 2 copayment from $1-$9. These increases are likely less than a cup of latte.

Plans are changing a copayment to a coinsurance. In 2024, there will be 21 plans (six plans each in Fort Lauderdale and Los Angeles, and nine in Milwaukee) that do this. That’s almost a third of the plans changing a copayment to a coinsurance Examples:

  • A$30 copay will be a 22% coinsurance in Fort Lauderdale
  • In Los Angeles, a $45 copay will be a 20% coinsurance, and
  • The $47 copay in Milwaukee will become a 25% coinsurance.

During last year’s Open Enrollment Period, I found only two plans making such a change.

This will inevitably raise costs. For instance, a popular, TV-advertised anticoagulant medication, a Tier 3 drug in most plans, has a retail cost of about $550. In Milwaukee, switching to a 25% coinsurance will increase a plan member’s cost sharing by $91 a month initially.

Plans are increasing the coinsurance for Tier 4 and Tier 5 drugs. Almost a quarter of the plans I reviewed are doing this.

  • I found 15 plans with increases for Tier 4 drugs, ranging from 1%-8%.
  • And there were four plans that raised the coinsurance for Tier 5 from 2%-5%. These are the most expensive drugs to treat complex conditions with cost sharing limited to 25%-33%. If the coinsurance increases by 25% to 29%, as in one Florida plan, a Tier 5 drug with a retail cost of $20,000 will cost the plan member $800 more every month.

However, it’s likely that those who take a Tier 5 drug will hit the threshold for Catastrophic Coverage and any additional costs will disappear for the rest of the year. But someone who only takes someone takes one Tier 3 may have to pay more all year.

Additional points

  • To be fair, I did find six plans that will decrease the coinsurance for Tier 4 and/or Tier 5 drugs. However, the premiums for all six are increasing, on average 59%.
  • Even though I did not focus on Medicare Advantage, Part D drug coverage works the same way, and these issues can apply to those plans.

To circle back to the important question: What will these changes mean to you and your drug coverage? Maybe you’ll pay more and maybe you won’t, but you’ll never know unless you pay attention during Open Enrollment. If you discover something, you have the opportunity to check what other plans in your area are doing. If you don’t, you may be in for some unpleasant shocks come January.

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