Thursday, October 9, 2014


Get Ready Now for Medicare Open Enrollment - Part D Changes for 2015

It’s less than two weeks to Medicare Open Enrollment, so it’s time for you to get familiar with what will change in 2015 and what you need to do now to prepare for it.

Of extreme importance is that the Annual Election Period (the open enrollment period) will begin on Wednesday, October 15 and will run only until Sunday, December 7 of 2014.  So if you want to change your plan, do so in this time frame.  If you do change, it will be effective on Thursday, January 1, 2015.


Preparing to Review Your Part D Coverage

One thing that you ought to do now to prepare for this is to make sure that to the extent possible you are on the right drugs and dosages.  So, for example, if you were planning to visit your physician to check on a condition you have, or if you are scheduled for a lab test to determine if a drug you are taking is working properly, you should be sure to do these now, so if you have to change your prescriptions in any way, you will know this before you go to determine which Part D plan is best for you in the coming year.  Or, if you are eligible for the annual wellness visit, do that now, so if anything comes up, and you are put on a new medicine, you will know what it is, and take it into account when selecting a Part D plan.

And be sure to update your personal list of drugs you take so it’s completely up-to-date.  While this list is critical in using Medicare’s plan finder to get you the best drug plan, you should always have such a list with you so you can show it to any health professional when you visit them, or if you have a medical emergency, your caregivers can quickly learn what drugs you are on.

Part D Premiums

The actuaries at the Centers for Medicare & Medicaid Services (CMS) recently released information about some of the costs that beneficiaries will experience in Part D of the Medicare program in 2015.  This indicates that the monthly premiums for Part D plans will increase slightly in 2015.  And so if your plan’s premium does increase, and especially if it goes up significantly, you may be able to find a drug plan for 2015 that will cost about what you are now paying in premiums.  Just remember that every year you should take advantage of the annual open enrollment period to search for the best Part D deal you can get – taking into consideration not only your monthly premiums, but also deductibles, co-payments, the plan’s formulary, the restrictions it places on individual drugs in its formulary, preferred pharmacies, mail order options, etc.

Discounts in the “Donut Hole”

In 2015 the discounts you will get if you go into the “donut hole” will increase both for brand name and for generic drugs.  Specifically, the discount on brand name drugs will increase to 55% (from 52.5% in 2014), and that for generic drugs will increase to 35% (from 28% in 2014).  So, in effect, the donut hole will close a little bit more in 2015.

The 2015 Part D Benefit Structure – Some Helpful Changes from 2014

And although the changes are not large, for 2015 there are increases in the annual deductible, the initial coverage limit, etc., which will increase costs for many beneficiaries.  But, as detailed above, if you do go into the donut hole, in 2015 Part D will pay a bit more for your brand name drugs and somewhat more for your generic drugs than in 2014.  So my guess is, even though premiums will average a tad higher than they were in 2015, most beneficiaries will be paying, for their overall Part D benefit, just a bit more in 2015 than in 2014.

In 2015 the four bands of the recommended benefit structure are as follows: (Remember that your plan’s structure, or that of any plan that you are considering, may look very close to this or not at all like it, because plans are allowed to vary from this as long as their structure is “actuarially equivalent” to it.)

Annual Deductible Band: From $0 to $320

The recommended deductible is $320, up $10 from 2014.  The beneficiary is responsible to pay all of this out-of-pocket.  Of course, many plans will have a smaller or no deductible.

25% Coinsurance Band: From $320 to $2,640

After the deductible is satisfied, the next $2,640 of drug costs falls into this band.  The plan will pay 75% of the cost of a drug, and the beneficiary, 25%.  The beneficiary will remain in this band until the plan has paid a total of a $1,980 and the beneficiary, $660.

At this point, the beneficiary has spent $980 ($320 plus $660) and the plan, $1,980, for a total of $2,960.  (You may see this figure referred to as the
“initial coverage limit;” it is up by $110 compared to the 2014 limit of $2,850.) The beneficiary now goes into the “donut hole.”

Donut Hole Band: From $2,960 to “Drug Expenses” of $4,700

Once in the donut hole, also known as the “coverage gap:”

For brand name drugs, the plan will pay 55% of the cost of a drug, and the beneficiary, 45%. (These figures were 52.5% and 47.5% in 2014, so the beneficiary gets a slightly better deal.)

For generic drugs, the government will pay 35% and the beneficiary, 65%. (In 2014 the government paid 28% and the beneficiary, 72%, so the beneficiary gets a better deal.)

The beneficiary will r
emain in the donut hole until their “drug expenses” total $4,700 (this is up by $150 compared to $4,550 in 2014).  That is, the beneficiary will have to incur an additional $3,720 in “drug expenses” while in the donut hole.  But by “drug expenses” we mean anything the beneficiary spends to meet the deductible, anything they spend in the 25% band, and whatever the beneficiary spends in the donut hole, plus 50% of the 55% their plan “pays” for their brand name drugs in the donut hole – technically, the plan doesn’t “pay” this 50% – it’s a discount given by the manufacturer – and this discount counts toward “drug expenses.”  (The extra 5%, which the plan actually pays, does not count, nor does the 35% which is paid by the government for generics.)

And while it will be different for each beneficiary, I estimate that in general you will actually pay somewhat over $2,000 of your own money on your Part D drugs before you get out of the donut hole and into the next band.

Catastrophic Band: From $4,700 Up

And once a beneficiary’s “drug expenses” reach $4,700, the beneficiary goes into the Catastrophic Band, where the beneficiary pays 5% of the cost of a drug, and the plan, 95%. This is sometimes called the “5% Band” for obvious reasons.  There are no upper limits to this band.  (This band started at $4,550 in 2014.)

And be advised that there have been tiny changes made to the minimum amount you must pay in this Catastrophic Band.  The minimum you must pay on a generic or preferred multi-source drug is $2.65 (up a dime from 2014), and, for other drugs (typically a brand-name) is $6.60 (up a quarter from 2014).


Late Enrollment Penalty (LEP)


Some other information the actuaries released include what the monthly premium late enrollment penalty will be.  This changes each year, and generally applies to those beneficiaries who did not sign up at their first opportunity to get Part D.  (If they had “credible coverage” it does not apply, nor does it apply to those beneficiaries who get “Extra Help.”)  The penalty in 2015 will be $0.3313 for each month that you could have had Part D coverage but did not.  This is slightly higher than the current 2014 penalty of $0.3242.  These penalties are added to your plan’s monthly premium amount and are collected with your plan’s premium.
High-Income Surcharge

The number-crunchers also have calculated the so-called high “income related Medicare adjustment amounts,” also known by their acronym “IRMAA,” and which I have always called the Part D premium surcharges.  If you are subject to this, the amounts will increase modestly in 2015.  More specifically, you will be subject to this if your 2013 adjusted gross income plus your tax-free interest exceeds $170,000 for a couple filing jointly or $85,000 for an individual or a married person filing separately.  (Your adjusted gross income plus your tax-free interest is called your “Modified Adjusted Gross Income,” or MAGI.)  Be aware that the health care reform legislation de-indexed these amounts (They used to rise with inflation.), so it’s possible that if your income in 2013 was higher than in 2012, you may first be subject to this in 2015.  (And remember that if you are subject to these for Part D, you will also be subject to the much higher Part B premium surcharge, if you have Part B.  The Part B premium amounts and surcharges have not yet been announced for 2015.)

The actual amounts that will be in effect for 2015 are:


If your 2013 joint income was over $170,000 and less than or equal to $214,000, your monthly surcharge is $12.30, up $0.20 from 2014.

If your 2013 joint income was over $214,000 and less than or equal to $320,000, your monthly surcharge is $31.80, up $0.70 from 2014.

If your 2013 joint income was over $320,000 and less than or equal to $428,000, your monthly surcharge is $51.30, up $1.10 from 2014.

If your 2013 joint income was over $428,000, your monthly surcharge is $70.80, up $1.50 from 2014.

(Remember that these are the rates for each beneficiary with Part D, so if you and your spouse are both enrolled in it, you each have to pay this monthly surcharge.)


If your 2013 income was over $85,000 and less than or equal to $129,000, your monthly surcharge is $51.30, up $1.10 from 2014.

If your 2013 income was over $129,000, your monthly surcharge is $70.80, up $1.50 from 2014.


If your 2013 income was over $85,000 and less than or equal to $107,000, your monthly surcharge is $12.30, up $0.20 from 2014.

If your 2013 income was over $107,000 and less than or equal to $160,000, your monthly surcharge is $31.80, up $0.70 from 2014.

If your 2013 income was over $160,000 and less than or equal to $214,000, your monthly surcharge is $51.30, up $1.10 from 2014.

If your 2013 income was over $214,000, your monthly surcharge is $70.80, up $1.50 from 2014.

These surcharges are not collected by your drug plan, but by the government, and you get them deducted from your Social Security, Railroad Retirement, or Federal Civil Service monthly payment; otherwise Medicare will bill you quarterly for them.

Enrollment Periods

Medicare beneficiaries will shortly begin receiving their Medicare & You 2015 booklets in the mail, or electronically if they signed up for this option.  Again, this signals that the open enrollment period will soon begin, on October 15, and will end with December 7.

And, as happens each year, a 5-Star Special Enrollment Period (SEP) will open on Monday, December 8 and will be continuously open from then and throughout 2015.  This will allow a Medicare beneficiary to sign up for a 5-Star Medicare Advantage and / or a 5-Star Part D drug plan.  A beneficiary can enroll in a 5-Star Medicare Advantage and / or a 5-Star Part D drug plan whether they are in Original Medicare or are already in a Medicare Advantage and / or a Part D drug plan.  A beneficiary can enroll beginning on December 8, 2014 and any day thereafter, and their enrollment will be effective with the first day of the month following their enrollment.  Also, a beneficiary enrolled in a plan with a 5-Star overall rating may also switch to a different plan with a 5-Star overall rating.  A beneficiary can use this Special Enrollment Period only once for an enrollment effective in 2015.  Note that achieving this rating is difficult, so it likely that you won’t have a 5-Star option available to you in your area.

Warning: A beneficiary in an Medicare Advantage only plan or in a Medicare Advantage plan with Part D coverage who switches to a stand-alone Part D prescription drug plan (PDP) with a 5-Star overall rating will lose Medicare Advantage coverage and will revert to Original Medicare for basic hospital and medical coverage.


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