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Cheapest Medicare Part-D premium isn’t always the least costly

Medicare Part-D

Many of my clients have told me they want the Medicare Part-D plan with the lowest monthly premium.  I’m fine helping them find this but just a low monthly premium doesn’t mean low monthly cost.

Last November I received a call from a friend of a client who wanted to discuss her Medicare plans.   Deciding on which supplement to use was easy.   We went with the lowest price company for the plan she wanted.  All companies pay exactly the same so price is really the only issue.

She had not enrolled in a Part-D plan in the three years since becoming eligible for Medicare so would be facing a penalty.  However she was concerned about the “what ifs” for the future and now wanted a plan.

I asked her what medications she took and the answer was “none.”   In discussing her income, it became likely that she would qualify for a low income subsidy meaning she would not be penalized for her lack of a plan in the past and would save money if and when she needed medication.  Everything went into force and she did indeed receive the subsidy.

Because she took no medication, she chose the lowest priced plan even though their formulary wasn’t as comprehensive as other companies.  Her only goal was to pay as little as possible each month.

Yesterday she called me because her eye drops cost $175.00.  I asked when she started using them and her answer was years ago but she only need them occasionally in the summer.  Had she disclosed this to me last year I would not have recommended her current plan but would have suggested another that only would add about $5 to her monthly premium.

Because of the subsidy, both plans would charge the same amount for a prescription.  After an annual deductible of $65 she would pay 15% from her medication.  So rather than paying the $175 she paid for her lowest priced plan, she would pay $81.50 for her first prescription and then $26.25 for each refill.

Fortunately, those people with LIS are not locked in for a year as most people would be.  For most, the change of plan can only take place during the annual election period (which most incorrectly call the annual enrollment period) for a January 1 effective date.   In this client’s case she was able to change plans and have the effective date the 1st of the following month.

The important lesson is that the lowest monthly premium is not always the lowest cost.  Not only does the formulary matter but step therapy, quantity limits and pre-authorization questions must be taken into consideration.  A knowledgeable agent can be invaluable in assisting you with this choice.

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