Ohio Department of Aging
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December 2007
Premiums and Deductibles only Part of the Medicare Rx Cost Equation
Many people with Medicare look at the cost of monthly premiums and yearly deductibles in selecting a Medicare prescription drug plan. However, this may not be a reliable indicator of annual out-of-pocket costs or the coverage offered for plan enrollees, according to recent research for MedPAC.
Drug plans with broader formularies cover more drugs, but often contain more coverage restrictions and require enrollees to pay more cost-sharing than plans with limited formularies, the study found.
After reviewing formulary data from Medicare Advantage Prescription Drug (MA-PD) plans and stand-alone Prescription Drug Plans (PDP) offered in 2007, the study found that the majority of these plans use a "three-tier" cost system, where drugs are placed into one of three price categories. Most additional drugs covered by PDP formularies are in non-preferred, or higher-costing tiers, which on average require copayments of $60 per drug.
Reviewers found that, on average, plans used various types of coverage restrictions on 18 percent of drugs. Twelve percent of drugs were subject to quantity limits, eight percent required prior authorization and one percent were subject to "step therapy," where enrollees had to try a cheaper alternative to their prescription prior to receiving coverage for their drug of choice. In the study's focus groups, pharmacists repeatedly noted that doctors were less willing to prescribe drugs requiring additional paperwork or authorization, often opting to switch to a generic or preferred drug instead.
While the plans with the highest enrollment figures (offered by Humana and AARP) often listed the greatest number of covered drugs, they also maintained high rates of restricted coverage. Kaiser Permanente, which offered the least number of drugs, had the largest proportion of unrestricted coverage.
Ninety-one percent of PDP enrollees and 67 percent of MA-PD enrollees also ended up in plans with no coverage through the doughnut hole, when enrollees lose drug coverage until they spend $3,850 out of pocket on covered prescription drugs. And in 2008, choices of plans with coverage through the gap will be even more limited.
Medicare enrollment for most beneficiaries is open through Dec. 31. Part D enrollees who choose to remain in their current plans will experience a noticeable increase in their Part D premium - up to $60 per year, on average.
The Ohio Senior Health Insurance Information Program (OSHIIP) helps older Ohioans better understand and use the various insurance policies, health services, programs and benefits available. Call the statewide hotline at 1-800-686-1578 to talk to an OSHIIP counselor.
Ohio Department of Aging