Implications for nonprofits
When medications get too expensive, everyone in the health care system loses. Patients don't get the treatment they deserve — and physicians must choose between practicing evidence-based medicine or prescribing what patients can actually afford.
The Medicare Prescription Drug, Improvement and Modernization Act (MMA) of 2003 was an attempt to solve these problems. This legislation created a new coverage: Medicare Part D, a voluntary outpatient benefit for prescription drugs.
Types of Part D plans
Generally, Medicare is available to people age 65 or older and to younger people who have disabilities or end-stage renal disease. Under the MMA, Medicare enrollees can get Part D coverage through private plans approved by the federal government. These plans must offer standard benefits defined by the MMA or an alternative that's equal in value. Plans can also offer benefits that go beyond the standards.
Part D plans fall into two groups. One includes "standalone" plans that offer only prescription drug coverage. The other includes Medicare Advantage plans that cover medical services along with prescription drugs.
For 2017, the standard benefits provided through Part D occur in three levels:
- Medicare enrollees pay a $400 deductible and 25 percent of their drug costs, up to an initial threshold of $3,700.
- Enrollees pay a larger share of their total drug costs, up to a second threshold of $4,950. This amount is sometimes called the "catastrophic coverage threshold."
- Enrollees pay 5 percent of their total drugs costs above $4,950 — or $3.30 for each generic drug and $8.25 for each brand-name drug.
These benefits and thresholds are adjusted annually.
When the MMA first took effect, enrollees had to pay 100 percent of their level 2 costs. Medicare offered no prescription drug coverage at this level, making level 2 a gap — or "donut hole" — between level 1 and level 3.
In 2010, the Affordable Care Act began to close the gap. This legislation lowered out-of-pocket costs for level 2 through a 50 percent discount on brand-name drugs.
Assuming no changes in the law, level 2 enrollees in 2017 with no other gap coverage will pay 40 percent of the total cost for brand-name drugs and 51 percent of the total cost for generics until they reach the catastrophic coverage threshold. By 2020, additional subsidies will reduce out-of-pocket costs in level 2 to 25 percent.
For 2017, the average monthly premium for Part D coverage is $35.63. However, actual monthly premiums vary by plan, ranging from $14.60 to $179.
Medicare enrollees with incomes below a certain level can get subsidies to help pay for premiums and out-of-pocket costs. In contrast, enrollees with incomes above a certain level pay a premium surcharge. These income thresholds also change annually.
Implications for nonprofits
Nonprofits that provide health care — or help pay for it — can benefit by remembering the following points about the MMA:
- Medication costs can still add up. Medicare enrollees could potentially pay thousands of dollars annually for some specialty drugs, even with Part D coverage in place.
- It pays to shop around. People can often save money by switching to a less expensive Part D plan during the annual enrollment period. Some plans also offer a Medicare MSA plan that works like a traditional Health Savings Account.
- There are ways to decrease out-of-pocket costs during the gap. These include shopping for plans with better coverage during this period, asking for generic drugs, and applying for assistance from Medicare, Social Security or a state pharmaceutical assistance program. You might also shop for prescription drugs with in-network providers by using online tools such as GoodRx.
- To reduce costs even more, stick to the formulary. Out-of-pocket costs for drugs increase substantially when they're not on the list of drugs approved for a Part D plan.
In addition, be aware of mandatory disclosures for organizations that provide drug coverage.
For example, Part D-eligible employees must be given a notice disclosing the creditable or non-creditable status of their group insurance coverage before the beginning of the Medicare Part D annual enrollment period (generally by October 15) and at certain other times. The same information must be disclosed to the Centers for Medicare & Medicaid Services using this form, generally within 60 days after the beginning of each plan year.
Kaiser Family Foundation: It pays to shop: Variation in out-of-pocket costs for Medicare Part D enrollees in 2016 by Jack Hoadley, Juliette Cubanski and Tricia Neuman (2015)
Kaiser Family Foundation: The Medicare Part D prescription drug benefit (2016)