As the deadline for switching Medicare health plans approaches, time is running out for seniors to avoid higher drug costs by shopping for different coverage.
Premiums are up next year in Minnesota for many with Medicare drug coverage. Beneficiaries also are facing higher deductibles at the pharmacy with some plans, plus higher costs if they don't use designated drugstores.
Nationally, the federal government says big sticker prices for a few high-priced medications are adding significant sums to drug spending for Medicare beneficiaries overall.
The trends make stories like Peter Connolly's noteworthy. The St. Paul resident will transform a hefty jump in pharmacy coverage costs into a modest one by changing plans.
"I don't look forward to it, but I almost expect that every year that I'll be changing," Connolly said. "And seemingly every year, I do have to find new pharmacy coverage."
The annual open enrollment period for Medicare health plans ends Dec. 7. About 900,000 Minnesotans are covered by the federal health insurance program, with more than half relying on what are known as Part D benefits for their medications.
Seniors buy the coverage from private insurers, either as part of a comprehensive Medicare health plan or as a stand-alone policy that's paired with other coverage. Costs are subsidized by the federal government.
Taxpayer expenditures for the "catastrophic" portion of coverage in Part D plans are expected to rise by $4.5 billion in 2016, an increase of more than 14 percent, the Associated Press reported this month. Spending for catastrophic coverage in the program has grown from $15.5 billion in 2012 to an estimated $31.2 billion this year.
Drug costs spiking
In the mix are expensive medications such as new treatments for hepatitis C, which can cure the disease — but with a sticker price of roughly $1,000 per pill. Medicare spending on those drugs nearly doubled this year.
Last month, a Star Tribune analysis found that 1 in 5 Minnesota seniors in Medicare health plans with drug coverage are facing double-digit percentage increases in their premiums for 2016 — anywhere from $8 to $43 per month.
For seniors who use lots of medications and are considering a switch, the premium for drug coverage isn't the only factor to consider. A lot of the fine print with drug plans can translate into big out-of-pocket costs.
The Minnesota Board on Aging says about 84 percent of stand-alone Part D plans next year will have pharmacy networks, meaning enrollees have extra costs if they use certain pharmacies. The share of plans with these networks has grown steadily since 2011, when they were a feature in only about 7 percent of plans, said Jean Wood, executive director of the aging board.
"The preferred pharmacy networks are much more important this year," Wood said. "This is one of the areas where they need to be very, very mindful, and be good shoppers."
Another wrinkle for 2016, Wood said, is that a greater share of stand-alone Part D plans will have deductibles. Required out-of-pocket spending is going up, too.
Currently, there are 29 stand-alone Part D plans in Minnesota, including 17 with annual deductibles ranging from $20 to $320. Next year, there will be 23, including 15 with annual deductibles ranging from $200 to $360.
Connolly, of St. Paul, said a new $250 deductible on his stand-alone Part D plan will prompt him to switch. The premium and copay requirements are getting steeper, too.
Altogether, Connolly's drug coverage costs were set to increase by about $360 next year, or 61 percent. If he switches to a new plan, the costs will rise by just $3.40.
Judith Getz of Richfield said she was facing an additional $360 in annual premium costs if she stayed with her Medicare health plan, which includes Part D coverage.
The policy has been good, Getz said, even though it didn't have complete coverage for an inhaler that's she gone without.
This fall, during a call to a government service called the Senior LinkAge Line, Getz happened to ask about health insurance options. A counselor helped her find a different plan that covers the inhaler and saves her nearly $700 on premiums.
"For me, that's huge," Getz said. "I've been without that inhaler for three years, because I simply can't afford it."
Barriers to changing plans
Such stories fit with the message sent each year by cost surveys and studies of Medicare benefits, said Juliette Cubanski, who studies trends in Medicare drug coverage for the California-based Kaiser Family Foundation. It pays to shop around, she says.
Even so, an average of about 13 percent of enrollees switch Medicare drug plans during open enrollment, according to a foundation study published two years ago.
"The cost to enrollees of switching in terms of the hassle factor seems to be a price that they're not necessarily willing to pay," Cubanski said.
With the current open enrollment, Cubanski is watching one cost increase that could get seniors to compare prices.
One of the most popular Medicare plans since the launch of Part D in 2006, she said, has been a product from Minnetonka-based UnitedHealthcare that's marketed in conjunction with AARP. About 3.5 million beneficiaries have the coverage at a premium of roughly $50 per month. When it was launched in 2006, the stand-alone Part D plan had a monthly premium of about $26, Cubanski said. Next year, it jumps to nearly $61.
"It will be interesting to see whether this level of premium increase actually gets people to rethink their enrollment," she said."
It's not a given that Medicare beneficiaries need to make changes to get the best deal, said Frederic Riccardi, director of client services at the New York-based Medicare Rights Center. With all the marketing presure, some seniors can wrongly think they need to make a change, he said.
But the nonprofit group runs a help line that fields calls from people every year who need to make changes because prices are going up, the terms of their coverage are changing or their health needs are different. In those cases, switching can bring savings, Riccardi said.
Christopher Snowbeck 612-673-4744 Twitter: @chrissnowbeck
