Your Part D drug plan would never tell you this, but the alarming fact is that there is no limit to what you might spend out-of-pocket for your prescriptions drugs in any given year. While this may not seem like much of a worry if you just take a few common generics, it becomes a far greater concern should you ever need high priced drugs — or have a medication bill of more than $600 per month. That could happen to any of us at any time.
While Part D costs are not capped, there is a “catastrophic level” of coverage that kicks in once Part D enrollees spend $5,000 of their own money out-of-pocket. Five thousand dollars is just the threshold in 2018. That threshold is forecast to rise to more than $9,000 per year in just eight years. Even worse, the $5,000 threshold is just for your covered drugs under Part D. It does not include other out-of-pocket spending for Medicare, such drugs you may receive through Medicare Part B (such as infusions received at a doctor’s office), and all other out-of-pocket costs.
Even when you spend $5,000 out-of-pocket, there are still out-of-pocket costs. At the catastrophic level of coverage there are smaller co-pays or 5% coinsurance, which can further lead to substantial out-of-pocket spending. In 2015, for example, Part D enrollees with out-of-pocket costs above the catastrophic threshold comprised just 2 percent of all enrollees, but their spending totaled 20 percent ($3 billion) of enrollees’ total out-of-pocket spending for the year, according to the Kaiser Family Foundation.
The White House budget released earlier this year proposes to establish an out-of-pocket limit to the Part D benefit by phasing down beneficiary co-insurance in the catastrophic coverage phase of the benefit from 5 percent to no-cost sharing over four years, beginning in 2019. While this is better than nothing, the proposals make other changes shifting significant costs to Part D plans which would likely be passed on to consumers in higher premium costs and higher drug costs for the sickest people who hit the pre-catastrophic Part D gap. One analyst has estimated those costs would average $1,000. In addition, there is no proposal at all that would allow Medicare to negotiate drug prices.
Medicare beneficiaries would still be on the hook for the $5,000 (and up) that would need to be spent out-of-pocket before the catastrophic coverage even starts. For the average beneficiary, that could take one-third or more of one’s entire Social Security income for the year.
TSCL believes a cap of $3,000 to $5,000 out-of-pocket, particularly for people who don’t receive any “Extra Help” to cover drug costs and out-of-pocket spending, would provide much needed protection that would significantly reduce the current impoverishing level of mandated out-of-pocket spending.
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Sources: “No Limit: Medicare Part D Enrollees Exposed to High Out-of-Pocket Drug Costs Without a Hard Cap On Spending,” Kaiser Family Foundation, November 2017. “Summary of Recent and Proposed Changes to Medicare Prescription Drug Coverage and Reimbursement,” Kaiser Family Foundation, February 2018.