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Senior Drug Plan Shopping Increasingly Means Looking Beyond Premiums

By CQ Staff

November 2, 2112 -- Finding a Medicare drug plan that covers the particular mix of drugs an individual senior needs at the lowest out-of-pocket cost means looking beyond the monthly premium charges.

It also means considering where one likes to go to fill prescriptions because a pharmacy may charge more if it's not part of a plan's network.

That's the conclusion of a new study that found major differences, not only in the drugs plans cover, but also in the cost-sharing amounts they charge. And out-of-pocket charges vary depending on whether or not a senior goes to a "preferred" pharmacy.

The analysis, by Avalere Health, looked at both stand-alone drug plans in the Medicare Part D prescription drug program and the drug coverage Medicare Advantage plans offered in 2013.

"Part D plans are increasingly using percentage cost sharing instead of fixed dollar copayments," the analysis says. That increases how much out-of-pocket charges vary.

Typically, drug coverage plans have five tiers of coverage. Tier one consists of preferred generics, which have the lowest out-of-of-pocket charges. Tier two is non-preferred generics that have higher out-of-pocket charges. Tier three includes preferred brand-name drugs, with even higher out of pocket charges but ones that are lower than in tier four, which consists of non-preferred brand-name drugs. Tier five is specialty drugs, which may include very costly biotech drugs, for example.

Plans typically give a drug preferred status if they can obtain a volume discount from the manufacturer.

All plans that include five tiers will use a cost-sharing percentage in the fifth tier, not fixed-dollar charges. Almost half of the five-tier plans will also rely on percentages in the fourth tier. And one-third will do so in tier three. In tiers one and two the copays will be a fixed-dollar amount.

"Many beneficiaries with serious illnesses may see higher cost sharing," said Bonnie Washington, a senior vice president at Avalere Health. "Beneficiaries need to look beyond premiums to really understand which drugs are covered and what their cost will be at the pharmacy counter."

The analysis also found wide variations in the percentages of drugs covered by the top ten stand-alone prescription drug plans.

For example, the Humana Enhanced plan will cover 76 percent of the drugs on the list of medicines that plans can cover in the Medicare Part D program. However, WellCare Classic will cover only 53 percent.

The two plans with the lowest premium charges each will cover 63 percent of the drugs. The two plans are Humana Walmart-Preferred Rx Plan and United AARP Saver Plus plan.

To further lower costs, low-premium plans affiliate with preferred pharmacies. If a plan member goes to a preferred pharmacy, he or she pays less out of pocket for a drug than if they go to a pharmacy that isn't preferred. The difference may not be small, the analysis said. Thus in the AARP Saver Plus Plan the out-of-pocket charge for a preferred brand-name drug at a preferred pharmacy is $45 but $70 at a pharmacy that isn't in the plan's network. And in the Humana Walmart plan, a preferred generic carries a $1 out-of-pocket charge at a preferred pharmacy but a $10 charge at a non-preferred pharmacy.

  • Avalere Analysis
  • Publication Details