The Expectation Gap: Medicare Part D

It’s open enrollment for Medicare starting this week – well, technically, October 15 through December 7 – and I am checking out my Medicare Part D plan. I am especially interested in making sure I have a Part D plan that will cover all my meds for the coming year.

My expectation is that, with a little bit of effort, I will be able to find a plan and, once I’ve found it, lock in a monthly premium that won’t break my budget. I think that is a reasonable expectation, don’t you?

Pull Up a Chair – We’ll Be Here for a While

No sense making you wait. Finding a plan, even using Medicare.gov’s straightforward Plan Finder, turns out to be a totally defeating exercise in clicking on one screen only to be redirected to another.

It’s not Medicare.gov’s fault – the website is incredibly accessible and useful. It’s the insurance companies’ hidden (buried?) information. And that hiding, by the way, is the power they have over my expectations.

Just What Expectations Do I Have?

A fair question. My expectation is that the medication my doctor has prescribed will be affordable and easy to get. I don’t think that is too much to ask. But this expectation turns out to be more like a wish – one granted only after you’ve made a sacred quest and survived untold challenges and adventures.

Let me share — I am on a medication that has been absolutely life-changing. Because it treats a chronic condition, I will need to be on it for the rest of my given days. The challenge is finding a plan that will cover the cost of this drug, so that I don’t have to take out a third mortgage, rely on my winnings from FanDuel or DraftKings, or set up a GoFundMe page.

Strategies Are Everything

I want to spend as little money as possible to get the best coverage available (my strategy). The pharmaceutical company’s strategy is to sell its drug at the highest price the market will bear, to make money for its shareholders and recoup its up-front investment in research and development. I get this. Fair’s fair.

If this were any other product, I would go online, search for the best price, and think about whether I could afford it. Given that it is going to be part of my life for the rest of that life, I would weigh the risks and benefits, bite the bullet, and pay for the damn thing.

(HINT: This is the groundwork for the expectation: Drug coverage should be a given benefit of an insurance plan.)

Part D Medication Coverage

Forgive me if I take a brief detour to explain some things about Part D coverage. It is the most recent addition to Medicare: it was signed into law in 2003 and finally got up and running in 2006. Until then, Original Medicare didn’t cover most of the prescription drugs you took at home, so unless you had coverage through a retiree plan or another program, you paid out of pocket.

(HINT: Expectation now operating – I should have affordable coverage for medications.)

This was groundbreaking, earth-shattering, and apparently an unbelievable money-making opportunity for insurance companies. The coverage was underwritten by the Behemoth Insurance Companies. They negotiated a price with the drug manufacturers, added a fee of their own for managing the pharmacy benefit (through a company called a pharmacy benefit manager), and then turned around and negotiated a different price and fee schedule with the government.

How Does All This Work?

The three largest pharmacy benefit managers (PBMs) are owned by three insurance giants: CVS Caremark by CVS Health/Aetna, Optum Rx by UnitedHealth, and Express Scripts by Cigna. As a result, the PBMs’ incentives and the insurers’ incentives are the same.

The way Part D was designed, PBMs got to negotiate rebates with the drug manufacturers. These rebates are calculated as a percentage of a drug’s list price, and often (too often, to my mind), the PBM keeps part of the rebate. A higher list price means a bigger rebate for the PBM. Because rebates are a percentage of the list price, a drug with a high list price and a big rebate can be worth more to the plan than a cheaper drug with no rebate. This gives PBMs little reason to push list prices down. For Part D enrollees, it’s especially costly, because our coinsurance is based on the list price before any rebate.

Spread Pricing, Fees, and Vertical Integration

PBMs are middlemen who negotiate with drug manufacturers on behalf of insurance plans, and they help decide which drugs go on a plan’s formulary. Here’s an example: Novo Nordisk and Eli Lilly both make GLP-1 drugs. Your plan may cover Ozempic (Novo Nordisk) or Mounjaro (Eli Lilly). The PBM negotiates with both companies to determine which drug will show up on the formulary.

Drug companies raise the list price, then pay part of it back to the plan or PBM to win a good spot on the formulary. Coinsurance and deductibles are calculated on the list price, not the price after rebates. If you are taking high-rebate drugs, you pay a share of a price that nobody in the system actually pays.

Vertical integration (the insurer, the PBM, and the pharmacy all owned by the same company) adds another layer of cost and profit. For some drug categories, net costs are higher when prescriptions are filled at pharmacies owned by the same company as the plan.

It’s a sweet deal for the insurance companies and a lousy system for those of us taking the drugs.

Back to My Expectations

From my perspective, all I expect is that I should:

– be able to keep taking the drug that is really helping me

– be able to get it at a reasonable price

– have it covered by every Part D plan that is offered

– be able to find it easily on the plan’s formulary

Here’s the Gap

There are only eight Part D plans offered in my zip code (a topic for a whole different post). None of them covers my drug. That is their right under current law, but I suspect it has more to do with the fact that they haven’t yet figured out how to make money off it.

To find out whether any of these plans covers my drug, I need to locate each plan’s formulary. This requires advanced computer skills, a research background, and unwavering persistence.

(HINT: This is more of a chasm than a gap.)

Formularies

A plan’s formulary is simply a list of the drugs the plan covers, by drug name, dosage, and form (e.g., pills, injections). Pretty straightforward. Pretty simple to organize and post. But hidden like King Tut’s tomb. Good luck finding it!

And each plan keeps its formulary in a different place, with slightly different ways of getting to it. No simple Google searches, no “Hey, Siri!” Just dogged archaeological work – only to find that my drug is NOT COVERED!

But, (and here is the good news), as long as you know the drugs you are taking, you can go on Medicare.gov to the compare plans page and list them there.  Then you need to find the plans in your area and, one by one, check to see if your drug(s) are covered.

I am lucky (well, obviously not): I have only one drug I’m trying to track down. Too many of us have five or six, and there is no guarantee that a single plan will cover all of them.

Like a Bridge Over Troubled Water

None of this is going to be fixed in the next two months. That means some of us won’t need to change a thing, others might be shocked at how much more they’ll pay for their meds, and sadly, some of us might find we are SOL.

I am doing everything I can right now to secure an affordable way to pay for the drug that has given me my life back. I have an appointment with my HICAP advisor (it’s called SHIP in other states), I am negotiating directly with the drug’s manufacturer, and I am spending hours (literally) online researching which formularies might cover my drug. I am also preparing for the inevitable denials and appeals I’ll need to go through to keep receiving the medicine that has proven to be a miracle.

What’s Your Gap?

I’ve shared my expectation gap – what’s yours?  If you think nothing’s changed this year to your old plan, you will be in for a surprise.  If this is the first time you have worked with choosing a plan, you will be in for a surprise.  If you have had a change in your health this past you, you may be in for a surprise.

Take a moment to listen to this really excellent explanation of your Part D benefits from Sylvia at theMedicarefamily.com