By its design as the national health plan for older Americans, Medicare insures a disproportionate number of people who take prescription drugs.
The majority of participants in the giant federal health program last year — 52.6 million, or 86% of the 61.2 million enrolled — were age 65 and older, according to the most recent report from the Medicare board of trustees, which comprises federal officials leading health, labor and retirement programs. The rest of the enrollees qualified due to disabilities. (The annual trustees report is a key source for statistics on Medicare.)
And people are more likely to need medicine as they age, as shown in a May 2019 report from the Centers for Disease Control and Prevention (CDC). About 85% of people age 60 and older in the U.S. reported having taken one or more prescription drugs in the past 30 days, while only 47% of those ages 20 to 59 did, according to 2015-2016 data from the CDC’s National Health and Nutrition Examination Survey.
Medicare Part D is an optional program to help people enrolled in the federal health program pay for prescription drugs. With annual expenses running to about $100 billion last year, it is the dominant insurer in the U.S. pharmaceutical market.
While funded by Medicare, Medicare Part D plans are managed by insurers such as the for-profit UnitedHealth and nonprofit Blue Cross Blue Shield plans. These insurers compete for customers, offering plans with varied monthly premiums and deductibles.
The annual open enrollment period for the Part D program allows older Americans the opportunity to shop among the plans available in their regions — and choose a different plan from the previous year if they would like. Open enrollment runs each year from Oct. 15 to Dec. 7.
Many people don’t take the time to shop for Part D plans each year, instead sticking with the coverage they already have, and thus missing out on savings, according to Leigh Purvis, director of health care costs and access in the policy institute within AARP, formerly known as the American Association of Retired Persons. (AARP, a member-driven nonprofit that recruits people age 50 and older, has almost 38 million members, according to its website.)
Purvis emphasized this point during an October 2019 event held by the nonprofit Alliance for Health Policy, titled “Modernizing Medicare Part D.”
“By not switching, a lot of them are actually paying a lot more for their Part D coverage than they potentially could from a plan that would offer similar coverage but potentially with lower premiums, lower cost sharing,” Purvis said. “So it’s not to their benefit to stay with those plans year after year.”
Yet, more than half of people in Medicare who could shop for a better deal miss this opportunity, according to an Oct. 29, 2020, report from the Kaiser Family Foundation, a nonprofit organization that conducts analyses and surveys about health care issues.
Tricia Neuman, executive director of the foundation’s program on Medicare policy, and her colleagues did an analysis of 2018 data taken from the Medicare Current Beneficiary Survey (MCBS). This is an ongoing survey that seeks to include a representative sample of the Medicare population.
Only 43% of people enrolled in Medicare reported in 2018 that they review or compare Medicare coverage options at least once every year, while 57% reported that they do not review or compare options annually, Neuman and her colleagues write.
They also found people with more education appeared more likely to shop around. Almost two-thirds of respondents with less than a high school education (63%) reported not reviewing coverage options annually, compared with 53% of individuals with a bachelor’s degree or higher. A third (33%) of people enrolled in Medicare with less than a high school degree say they never review their options, Neuman and her colleagues write.
Shopping among Medicare drug plans can be a daunting task, with consumers often having to navigate among dozens of options available.
In many cases, people earlier in their lives received health insurance as part of employment compensation offered to them or family members, notes Brian McGarry, an assistant professor in the departments of medicine and public health sciences at the University of Rochester, whose research focuses on the economics of aging.
In many companies, benefit specialists weed through competing available health plans and then offer workers a narrow selection of choices, sometimes only one or two options. With Medicare, this task rests directly with older Americans.
“Upon turning 65 they asked to become experts in insurance plans and making choices across insurance plans,” McGarry says. “It’s a lot to ask.”
Navigating the Medicare plan finder
To help people sort through their options, Medicare has a website for comparing Part D plans.
The Centers for Medicare and Medicaid Services (CMS) in 2019 redesigned the plan finder in response to complaints about the website being confusing, difficult to use and sometimes inaccurate, as explained in a 2019 Health Affairs research article by McGarry and two co-authors: Nicole Maestas, an associate professor at Harvard Medical School; and David C. Grabowski, a professor at Harvard Medical School. Their article is titled “Assessing The Redesigned Medicare Plan Finder Tool: Room For Improvement.”
When consumers provide their Medicare ID number, the redesigned Medicare plan finder can fill in automatically information about medicines taken by people already covered by Part D, they write.
“This information is critical to producing accurate personalized cost estimates for each available plan. In the past, consumers needed to enter this information by hand,” McGarry, Maestas and Grabowski write. “Because Part D enrollees fill an average of 4.5 prescriptions a month, this task was likely an important barrier to effective Plan Finder use.”
CMS also has fixed an issue that McGarry and co-authors cited in their Health Affairs paper. The Medicare Plan Finder in 2019 had a default to sort among plans by the monthly bill — or premium — customers would pay to insurers.
“A large literature stresses the power of choice architecture and defaults – such as the ordering of options in a menu – in driving individuals’ choices,” they write. “This new default or sorting plans by their premium should be expected to steer users toward plans with low premiums, some of which may be undesirable for a number of reasons.”
The focus on premiums could result in some consumers buying Part D plans that had higher total costs, factoring in out-of-pocket payments for medicines, McGarry says.
But the 2021 version of Medicare’s plan finder website automatically sorts options by showing what it calls “the lowest premium + drug cost.” This combines the potential Part D customers’ annual payments to the insurer plus an estimate of what medicines will cost, based on drugs consumers now are taking.
Testing out the plan finder site with a hypothetical patient
Journalist’s Resource used Medicare’s plan finder site to test how these different sorting options would work for a hypothetical patient: someone living in Los Angeles who needed three medicines: the blood thinner Eliquis , plus a cholesterol reducer (atorvastatin) and high blood pressure pill (lisinopril ). Journalist’s Resource chose these medicines for our hypothetical patient because they are among the most widely used by people enrolled in Part D Plans. Medicare has an online database that is easily searched, the Part D Drug Spending Dashboard. This dashboard shows that in 2018, almost 11.9 million people in Part D plans took atorvastatin, 8.3 million took lisinopril and 1.6 million used Eliquis.
Using the “lowest drug + premium cost” search option, the hypothetical Los Angeles customer would have estimated annual costs of $1,363.42 for 2021 by selecting the Clear Spring Health Premier Rx plan. The estimated cost would drop to $1,317.80 if the customer used mail-order pharmacy.
Searching on “lowest monthly premium,” the first option shown would be Aetna’s SilverScript SmartRx plan. Its monthly premium would be $7.20, while the Clear Spring premium would be $13.30.
But the estimated total drug cost with the Aetna plan would be $2,759.00, which would only drop to $2,758.83 if the customer used the mail order option.
The Clear Spring plan has not been established long enough to earn marks in the star ratings developed by CMS. CMS uses these ratings to give Part D customers information about how plans have handled factors like customer service in the past. The hypothetical customer might choose to look for a plan that had already earned a score from CMS.
During Part D open enrollment, people also have the option of switching to what are called Advantage plans, where sometimes manage their entire Medicare benefit.
The Advantage plan is formally known as Medicare Part C. Medicare divides its health benefits roughly into Part A for hospital services and Part B for visits to physicians’ offices. Advantage plans cover everything covered under Part A and Part B, and often cover Part D as well. About 24 million people enrolled in Advantage plans, accounting for more than a third of Medicare’s total enrollment of 61.2 million, according to the annual report from the board of trustees for the giant health program.
Congress allows Medicare Advantage plans to offer their customers extra benefits traditional Medicare does not, helping them attract customers. And these Advantage plans may reduce their expenses for customers. The hypothetical Los Angeles resident described above, for example, has a choice of 59 Advantage plans in addition to 32 standalone Part D plans, meaning ones that manage only the pharmacy benefit.
Using the Medicare Plan Finder, that customer would see that the Blue Shield Inspire (HMO) plan wouldn’t charge a monthly premium. Total estimated annual costs would be $654.36. This Medicare Advantage plan, as shown in the screenshot below, includes some coverage for dental, vision and hearing services.
But there are often trade-offs for these kinds of perks for customers of MA plans, such as limits on access to medical care, write David J. Meyers, Amal N. Trivedi, and Vincent Mor, all of Brown University, in a May 2019 Health Affairs article, “Limited Medigap Consumer Protections Are Associated With Higher Reenrollment In Medicare Advantage Plans.”
Many people in traditional Medicare use a supplemental form of insurance, known as Medigap, to help pay their share of medical expenses. Traditional Medicare does not pay for all services, but instead has set copays that people must contribute. There is no limit on how much these copays may be, and Medigap insurance can help cover the cost of copays and deductibles.
Medicare Advantage plans, in contrast, have limits on what their customers may have to pay out of pocket. People enrolled in these plans don’t need and shouldn’t buy Medigap plans, CMS said in its “Medicare and You Handbook 2021.”
People enrolled in traditional Medicare can use their health benefits to see any doctor enrolled in the program. But Medicare Advantage plans are run along the lines of other commercial insurance plans. Insurers try to direct patients to the network of doctors and hospitals with whom they have reached agreements about payment rates. For MA customers, visiting doctors who are not in their insurers’ networks is more expensive than seeing ones who have agreements with the health plans.
In an interview with Journalist’s Resource, Meyers of Brown University said the perks of Medicare Advantage tend to appeal to people in better health, while restrictions on medical services make the insurer-run plans less attractive to people in need of more health care.
“During beneficiaries’ first twelve months of Medicare eligibility, beginning at age sixty-five, federal law requires insurers to offer guaranteed issue for Medigap plans without restrictions for preexisting conditions or any other sociodemographic factor,” Meyers and his co-authors write. “Insurers are also prohibited from charging higher premiums for preexisting conditions.”
But people lose this federal protection if they use a Medicare Advantage plan. Only eight states have laws that can preserve some access to the supplemental insurance for those seeking to switch back to traditional Medicare: Alaska, Connecticut, Maine, Massachusetts, Minnesota, New York and Vermont, Washington, Brown and his co-authors write.
That’s why the switch to Medicare Advantage may prove costly for those people who would like to switch back to traditional Medicare during a subsequent enrollment period to cope with a serious illness.
“Medicare beneficiaries with complex care needs often face a higher burden of costs and may benefit from a greater continuity of care,” they write. “In most states these enrollees may face significant barriers to enrollment in Medigap that may increase their exposure to high out-of-pocket spending and lead to disruptions in the continuity of care if they need to switch between MA and traditional Medicare.”
CMS included a warning about potential loss of Medigap in a guide on enrollment. The following information appears on page 74 of CMS’ “Medicare and You Handbook 2021.”
In an Oct. 2 tweet, Kaiser’s Neuman also sought to draw attention to the trade-offs involved in MA. The COVID-19 pandemic poses risk to older people, which may make them want to consider traditional Medicare’s potential advantages in case of a serious illness.
The start of the #Medicare open enrollment is less than 2 weeks away
With older adults at great risk of serious illness if infected with the virus, this may be the year seniors focus on what matters most if they get sick (cost-sharing, networks) vs healthy (gym membership)
— Tricia Neuman (@tricia_neuman) October 2, 2020
For on the cost of drugs, see Drug Prices: Why prescription medicines remain unaffordable to many people.