GETTING THE MOST OUT OF YOUR MEDICARE PRESCRIPTION DRUG PLAN

Medicare prescription drug coverage is even more confusing than commercial prescription drug coverage, especially due to the coverage gap (donut hole). Medicare plans are heavily biased to steer you toward generic drugs. While in principle this is a good thing with regard to avoiding wasteful spending, it is a VERY bad thing for people with diabetes. That is because only about 20% of diabetes medications are generic. The other 80% are still brand-name drugs, and have list prices ranging from $300 to $800 per month.  These brand drugs may be very beneficial to you, but unless you are wealthy or know how to carefully navigate the system, you will not have access to them.  This article aims to help you navigate the system so that YOU will have access to what your doctor recommends. 

Similarities and differences between commercial insurance and medicare part D

Similarities

Insurance plans that people get through their employer or purchase on their own are considered commercial prescription drug plans. Once you reach age 65, you will likely switch to a prescription drug plan that is regulated under the rules of Medicare part D. You may have head of these being called “part D replacement plans”1Yes, these are all Medicare plans, whether it is through WellCare, Humana, Anthem, etc.  I have many patients that seem to be confused about this point.. Medicare part D and “part D replacement plans” are different than commercial insurance, but many features are similar. These include:

  1. Both have monthly premiums, a fee you pay to have access to the insurance. 
  2. Both have similar kinds of formulary rules, which determines which drugs are covered, rules that dictate when your plan will cover the drug, and rules that dictate how drug costs are split between you and the insurer. 
  3. Both have a deductible, which is a minimum amount of money you must spend before your drug coverage takes effect. 
  4. Both have rules about how how much you pay at the pharmacy (copayments or coinsurance). 

Differences

While many of the basic rules governing Rx drug coverage are the same, there are a few profound differences. 

  1. Nearly all Medicare plans have a coverage gap (donut hole).
  2. Because of the coverage gap, the price you pay for a drug will fluctuate during the year. You will have to do more work to determine how much a drug will cost you over the entire year. 
  3. Medicare plans ARE NOT eligible for using copayment coupons, whereas commercial drug plans can use copayment coupons.
  4. Medicare plans ARE eligible for the drug manufacturer’s patient assistance program, whereas commerical drug plans cannot use patient assistance programs. These programs can save you hundreds if not thousands of dollars a year. Many people are eligible for patient assistance programs but never apply. 

Medicare Rx Drug Vocabulary

  • List Price: The (inflated) price that the drug manufacturer suggests that the drug should sell for. 
  • Manufacturer rebate: A negotiated price reduction for the drug. The exact rebate amount is a secret. 
  • Net Price: What your insurance company actually pays for a drug. It is equal to the List Price – Manufacturer rebate.
  • Total Drug Expenditures (TDE): This refers to the money spent on drugs on your behalf by the insurance company. Every year, once TDE reaches a certain threshold, you will enter the coverage gap. I believe that TDE is based off the List Price of the Drugs (rather than the net price)
  • True Out Of Pocket Expenditures (TrOOP): This traditionally referred to money spent on drugs by you, and is a threshold of money by which you exit the coverage phase into the catastrophic phase. However, the name is now a bit of a misnomer because it also includes money spent by your insurance company during the coverage gap as well. And since the insurer pays 70% of the List Price of the drug during the coverage gap, this ends up being a very significant amount. 

Understanding the 4 phases of a medicare drug plan

Why understanding the phases of medicare coverage is important

The structure of medicare part D is DESIGNED to scare you off from brand name drugs. The pricing is very confusing, and because of the different phases of coverage there are enormous fluctuations in your monthly cost. The point is to get you to switch to all generic medications. While that may be ok for some health conditions, it is NOT OKAY for most patients with diabetes, since the modern drugs (anything made in the past 30 years) is still a brand name drug. The modern diabetes drugs may have specific benefits for you that the generic diabetes medications will not have. Unfortunately, EVERY SINGLE modern diabetes drug has a high list price. So, unless you are only using generic drugs, you will always face a high costs during the deductible phase and the coverage gap.

All is not lost, though. When you average the cost of the drugs over the year, the price is not nearly as steep as it appears when you have the spike in price from coverage phase to coverage gap phase (the example below demonstrates this). In addition, a large portion of seniors with diabetes will qualify for a patient assistance program, which will pay for the cost of the drug. 

 

Here is my point: Do not fall for the pricing tricks and just settle for generic drugs if a modern drug would be better for your health. Do your research and use your doctor to get you the right treatment. 

Here is a detailed example of how medicare prescription drug pricing works

You can understand the drug pricing if you look up your medications on the medicare.gov website (this feature is only available during the enrollment period as far as I am aware). 

On the medicare.gov website, when you select a plan it wil give you a breakdown of the drug coverage. This example is a hypothetical insurance plan that is based off one I looked up on the medicare website. Make note of:

      • How the costs break down between different drug tiers and between the different coverage phases. 
      • The drug plan I chose had a $435 deductible
      • That preferred brand drugs cost $47.00 a month while in the coverage phase, but skyrocket up to 25% of the list price once in the coverage gap (you will see how much of a price hike this is in a moment).  

For this example, I picked a common 3-drug combination for treating diabetes, which has 1 generic drug (metfromin) and 2 brand drugs (ozempic and farxiga). The medicare.gov website will show you your estimated costs for these medications with the insurance plan you select. These are shown in the table above. Make note of:

    • The 2 brand drugs I chose are “preferred brand” tier, so will be more favorably priced than they would have if they were “non-preferred brand” tier. 
    • You can see that both of the brand name drugs have a very high list price ($520 for farxiga and $816 for ozempic). This high list price leads to high costs for me during the deductible phase and during the coverage gap.

So this is what I would have paid each month when I showed up to the pharmacy. The first month is very expensive, since I’m paying off the deductible. The next couple months are much more reasonable since I’m in the coverage phase. By April I hit the coverage gap, so the price skyrockets. It takes about 4 months to get out of the donut hole, then the prices drop back down. On average, I would have paid $211 per month. That is a lot of money, but not as bad as it may appeared in january ($529) or in april ($334). And remember, a large number of people with medicare will also qualify for a patient assistance program or a Low income subsidy so will not have to pay nearly this much.  

Medicare Extra Help Low-Income Subsidy (LIS) program

Extra Help is a federal program that helps pay for some to most of the out-of-pocket costs of Medicare prescription drug coverage. It is also known as the Part D Low-Income Subsidy (LIS).

What are the benefits of the Extra Help program?

  1. Pays the Part D premium up to a state-specific benchmark amount
  2. Lowers the cost of prescription drugs
  3. Depending on your income and assets, you may qualify for either “full” or “partial” Extra Help. 

How do you apply for the Extra Help program?

You can apply for the Extra Help program through the Social Security Administration, using the agency’s print or online application. To apply online, go to https://www.ssa.gov/benefits/medicare/prescriptionhelp. Note, if you have Medicaid, SSI, or an MSP, you should be automatically enrolled in Extra Help so you would not need to apply.

What are the eligibility requirements for Extra Help? How does it affect my drug costs?

Should you apply for Extra Help if you already have another form of Rx drug coverage?

If you are eligible for Extra Help but already have other drug coverage (referred to as “credible drug coverage” in medicare-speak), you will need to figure out which is more beneficial to you. Ask your former employer or union if you can get a Part D plan without losing the retiree benefits you want to keep, and check if unenrolling from retiree drug coverage makes you ineligible for other retiree health benefits.

How do you ensure that you stay enrolled in Extra Help from year to year?

To keep Extra Help benefits from year to year, you must continue to meet the eligibility requirements. Depending on your state and how you initially qualified for Extra Help, this process may be automatic or require that you submit information to confirm your continued eligibility.

 

The Social Security Administration (SSA) may send you a letter in August or September titled “Social Security Administration Review of Your Eligibility for Extra Help”. The letter outlines the financial and personal information you provided when you applied and asks if any of it has changed (Note that if you and your spouse applied for Extra Help together, you will receive only one letter). If you receive the letter, you must complete the enclosed “Review of Your Eligibility” form and send it back to SSA within 30 days. SSA will use your answers to decide if you still qualify for Extra Help and at what level (full or partial), depending on how your income and assets changed. If you do not fill out and return the Review of Your Eligibility form, Extra Help assistance will end December 31. 

 

If you qualified for Extra Help automatically because you had Medicaid, Supplemental Security Income (SSI), or a Medicare Savings Program (MSP):

  • If you still have Medicaid, SSI, or an MSP in the fall, you do not have to do anything. Your state should inform Medicare that you are still enrolled in one of these programs, and you will continue receiving Extra Help. You should not receive any notice unless your copayments are changing for the next year. If your income changed enough to affect your copayments, you should receive a notice telling you this in early October.
  • If you no longer have Medicaid, SSI, or an MSP in the fall, you should apply for Extra Help. If you do not apply, your Extra Help ends December 31. You should receive a letter in the fall explaining that you will lose Extra Help unless you apply and are accepted.

Medicare Savings Programs (MSPs)

Medicare Savings Programs (MSPs), also known as Medicare Buy-In programs or Medicare Premium Payment Programs, help pay your Medicare costs. These are state-level programs, so you have to apply through your state and the requirements differ depending on which state you are in.

 

There are 3 MSPs, and you apply for all 3 at the same time (the government will determine which specific MSP you qualify for, if any) The exact detailed differences between the 3 different programs are outside the scope of this primer. However, in general, all of the MSPs pay for Part B premiums and one of the programs also pays the part A premium for you. The three programs are called: Qualified Medicare Beneficiary (QMB), Specified Low-income Medicare Beneficiary (SLMB), and Qualifying Individual (QI) Program.

 

If you qualify and are accepted into an MSP, you will also automatically be enrolled in the Extra Help program, which significantly decreases your Medicare prescription drug (Part D) plan costs.

How to apply for MSPs

This depends on the state. The best place to start is your State Health Insurance Assistance Program (SHIP), all states have one. There is a federally-funded website that will help you locate your SHIP: https://www.shiptacenter.org/. Once on your state’s SHIP website, you can find MSP information specific to your state, as well as contact numbers for Medicare Counselors.

Eligibility requirements for MSPs

To qualify for an MSP, you must have Medicare Part A and meet your state’s specific income and asset requirements. You will find this information on your state’s SHIP website. 

Drug Manufacturer Patient Assistance Programs (PAP)

If you have Medicare part D, there is a good chance you can qualify for a patient assistance program (PAP) that will cover the cost of your diabetes medications. The main requirement is that your income is below a certain threshold. This threshold is usually 300% or 400% of the federal poverty threshold (see table below), for which many retirees will fall under. Note that your savings and assets DO NOT COUNT AGAINST YOU! This is a common misconception amongst patients.  

How do I find out if I am eligible for a PAP?

Find your medication in the table below. It will show the income cutoff. If you think you may qualify, clink the link to the PAP website. Download the PAP application and print it out. Carefully review the requirements and gather the required documentation (this usually includes proof of your income and sometimes receipts showing how much you have spent on medications so far this year). Once you have the required documentation, bring the form to your doctor to complete their portion. Have the doctor fax the form in, and you should get a decision within a couple weeks. 

2021 Patient Assistance Programs

Requirements:

  • Must either be a Medicare patient or uninsured
  • household income < 400% the federal poverty level ($51,520 or less for individuals, $69,680 or less for couples, or $106,000 or less for a family of 4)
  • Must have spent at least 2% of your annual hosehold income on prescription medications
  • Link to Sanofi Patient Connection

Requirements:

  • Must either be a Medicare patient or uninsured
  • household income < 400% the federal poverty level ($51,520 or less for individuals, $69,680 or less for couples, or $106,000 or less for a family of 4)
  • Must have spent at least 2% of your annual hosehold income on prescription medications
  • Link to Sanofi Patient Connection

Requirements:

  • Must either be a Medicare patient or uninsured
  • household income < 400% the federal poverty level ($51,520 or less for individuals, $69,680 or less for couples, or $106,000 or less for a family of 4)
  • Link to Lilly’s patient assistance program. On this site, click the link “check your eligibility”, then scroll down and click on “print application”

Requirements

  • Must either be a Medicare patient or uninsured
  • There is an income requirement, but it is not specified on the program website. It appears to be < 300% the federal poverty threshold ($38,280 or less for individuals, $51,720 or less for couples, or $78,600 for less for a family of 4)
  • Link to the AstraZeneca patient assistance program. On this site, scroll down and click “download an application”

Requirements

  • Must either be a Medicare patient or uninsured
  • There is an income requirement, but it is not specified on the program website. It appears to be < 300% the federal poverty threshold ($38,280 or less for individuals, $51,720 or less for couples, or $78,600 for less for a family of 4)
  • Link to the AstraZeneca patient assistance program. On this site, scroll down and click “download an application”

Requirements

  • Must either be a Medicare patient or uninsured
  • Household income must be < 400% the federal poverty threshold ($51,520 or less for individuals, $69,680 or less for couples, or $106,000 or less for a family of 4)
  • Link to Novo Nordisk patient assistance program. On the site, scroll down and click the link for the PAP application form that says “download now”. 
  • If you are approved, the medication will be shipped to your doctor’s office for you to pick up. 
  • Note that a new prescription needs to be sent in every 4 months by your doctor.
     

Requirements:

  • Must either be a Medicare patient or uninsured
  • household income < 400% the federal poverty level

    ($51,520 or less for individuals, $69,680 or less for couples, or $106,000 or less for a family of 4)

  • Link to Lilly’s patient assistance program. On this site, click the link “check your eligibility”, then scroll down and click on “print application”

Requirements:

  • Must either be a Medicare patient or uninsured
  • household income < 400% the federal poverty level ($51,520 or less for individuals, $69,680 or less for couples, or $106,000 or less for a family of 4)
  • Link to Lilly’s patient assistance program. On this site, click the link “check your eligibility”, then scroll down and click on “print application”

Unfortunately, there is no patient assistance program for this medication.

Requirements:

  • Must either be a Medicare patient or uninsured
  • household income must be < 300% the federal poverty level ($38,280 or less for individuals, $51,720 or less for couples, or $78,600 for less for a family of 4)
  • You must have spent 4% of your annual income on prescriptions.
  • Link to Johnson and Johnson’s patient assistance program. On this site, click the link “Patient assistance application form”.

Requirements:

  • Must either be a Medicare patient or uninsured
  • household income must be < 400% the federal poverty level ($51,520 or less for individuals, $69,680 or less for couples, or $106,000 or less for a family of 4)
  • Link to the Merck patient assistance program. On this site, click the link “download enrollment form (application)”.

Requirements

  • You must have medicare part D insurance or be uninsured.
  • Household income must be <400% the federal poverty threshold ($51,520 or less for individuals, $69,680 or less for couples, or $106,000 or less for a family of 4)
  • Link to the Boehringer Ingelheim website with the assistance program application. On the site, scroll down and click the link that says “flat form (print and fill out)”
  • If you are approved, the medication will be mailed directly to you. 

Requirements:

  • Must either be a Medicare patient or uninsured
  • household income < 400% the federal poverty level ($51,520 or less for individuals, $69,680 or less for couples, or $106,000 or less for a family of 4)
  • Must have spent at least 2% of your annual hosehold income on prescription medications
  • Link to Sanofi Patient Connection

Requirements

  • Must either be a Medicare patient or uninsured
  • Household income must be < 400% the federal poverty threshold ($51,520 or less for individuals, $69,680 or less for couples, or $106,000 or less for a family of 4)
  • Link to Novo Nordisk patient assistance program. On the site, scroll down and click the link for the PAP application form that says “download now”. 
  • If you are approved, the medication will be shipped to your doctor’s office for you to pick up. 
  • Note that a new prescription needs to be sent in every 4 months by your doctor.

Requirements:

  • Must either be a Medicare patient or uninsured
  • household income < 400% the federal poverty level ($51,520 or less for individuals, $69,680 or less for couples, or $106,000 or less for a family of 4)
  • Link to Lilly’s patient assistance program. On this site, click the link “check your eligibility”, then scroll down and click on “print application”

Requirements

  • Must either be a Medicare patient or uninsured
  • Household income must be < 400% the federal poverty threshold ($51,520 or less for individuals, $69,680 or less for couples, or $106,000 or less for a family of 4)
  • Link to Novo Nordisk patient assistance program. On the site, scroll down and click the link for the PAP application form that says “download now”. 
  • If you are approved, the medication will be shipped to your doctor’s office for you to pick up. 
  • Note that a new prescription needs to be sent in every 4 months by your doctor.
     

Requirements

  • Must either be a Medicare patient or uninsured
  • There is an income requirement, but it is not specified on the program website. It appears to be < 300% the federal poverty threshold ($38,280 or less for individuals, $51,720 or less for couples, or $78,600 for less for a family of 4)
  • Link to the AstraZeneca patient assistance program. On this site, scroll down and click “download an application”

Requirements

  • Must either be a Medicare patient or uninsured
  • Household income must be < 400% the federal poverty threshold ($51,520 or less for individuals, $69,680 or less for couples, or $106,000 or less for a family of 4)
  • Link to Novo Nordisk patient assistance program. On the site, scroll down and click the link for the PAP application form that says “download now”. 
  • If you are approved, the medication will be shipped to your doctor’s office for you to pick up. 
  • Note that a new prescription needs to be sent in every 4 months by your doctor.
     

Requirements:

  • Must either be a Medicare patient or uninsured
  • household income < 400% the federal poverty level ($51,520 or less for individuals, $69,680 or less for couples, or $106,000 or less for a family of 4)
  • Must have spent at least 2% of your annual hosehold income on prescription medications
  • Link to Sanofi Patient Connection

Unfortunately, there is no patient assistance program for this medication.

Requirements:

  • Must either be a Medicare patient or uninsured
  • household income < 400% the federal poverty level ($51,520 or less for individuals, $69,680 or less for couples, or $106,000 or less for a family of 4)
  • Must have spent at least 2% of your annual hosehold income on prescription medications
  • Link to Sanofi Patient Connection

Requirements

  • You must have medicare part D insurance or be uninsured.
  • Household income must be <400% the federal poverty threshold ($51,520 or less for individuals, $69,680 or less for couples, or $106,000 or less for a family of 4)
  • Link to the Boehringer Ingelheim website with the assistance program application. On the site, scroll down and click the link that says “flat form (print and fill out)”
  • If you are approved, the medication will be mailed directly to you. 

Requirements

  • Must either be a Medicare patient or uninsured
  • Household income must be < 400% the federal poverty threshold ($51,520 or less for individuals, $69,680 or less for couples, or $106,000 or less for a family of 4)
  • Link to Novo Nordisk patient assistance program. On the site, scroll down and click the link for the PAP application form that says “download now”. 
  • If you are approved, the medication will be shipped to your doctor’s office for you to pick up. 
  • Note that a new prescription needs to be sent in every 4 months by your doctor.

Requirements:

  • Must either be a Medicare patient or uninsured
  • household income < 400% the federal poverty level ($51,520 or less for individuals, $69,680 or less for couples, or $106,000 or less for a family of 4)
  • Link to Lilly’s patient assistance program. On this site, click the link “check your eligibility”, then scroll down and click on “print application”

Requirements

  • Must either be a Medicare patient or uninsured
  • Household income must be < 400% the federal poverty threshold ($51,520 or less for individuals, $69,680 or less for couples, or $106,000 or less for a family of 4)
  • Link to Novo Nordisk patient assistance program. On the site, scroll down and click the link for the PAP application form that says “download now”. 
  • If you are approved, the medication will be shipped to your doctor’s office for you to pick up. 
  • Note that a new prescription needs to be sent in every 4 months by your doctor.
     

Requirements

  • Must either be a Medicare patient or uninsured
  • Household income must be < 400% the federal poverty threshold ($51,520 or less for individuals, $69,680 or less for couples, or $106,000 or less for a family of 4)
  • Link to Novo Nordisk patient assistance program. On the site, scroll down and click the link for the PAP application form that says “download now”. 
  • If you are approved, the medication will be shipped to your doctor’s office for you to pick up. 
  • Note that a new prescription needs to be sent in every 4 months by your doctor.