Annuitants Will Feel the Impact of Medicare Part D Changes

Ad:
Do you need concrete strategies for tackling the complexity of IT modernization? Look no further than FCW's Pillars of Modernization workshop and exclusive in-person event. Join government and industry peers in Washington DC on March 23 for breakfast, networking and insightful discussions on IT modernization. Don't miss your chance to hear from the Chief Information Officers of OPM and the Defense Information Systems Agency. Register now at Fcw.com/events.

Ross Gianfortune
This is GovExec Daily, where we bring you the federal stories that really matter.  It's March 13, 2023 . I’m Ross Gianfortune.

Many federal annuitants are familiar with Medicare Part D. The plan is used by nearly 50 million Americans as a part of their health insurance needs. Last year, the Inflation Reduction Act enacted some reforms to Medicare Part D that annuitants will have to heed. As with every health insurance situation, individuals have different concerns and usages, but our guest today has a good outline as to what changes are coming in the short and medium term for those enrolled in Medicare Part D.

Kevin Moss is a senior editor with Consumers’ Checkbook. Checkbook’s 2023 Guide to Health Plans for Federal Employees is available now. He’s also a GovExec contributor and his latest post on our site is headlined “How Changes to Medicare Part D Will Impact Federal Annuitants.” After a short break, he’ll join me to talk about Medicare Part D and how feds and annuitants should approach it.

Ad
Want to hear more from GovExec, Nextgov, Defense One and Route Fifty? Tune in to our virtual events to hear interviews with government leaders about the most important topics today, including the federal workforce, health IT, artificial intelligence, 5G and more. Visit govexec.com/events to learn more.

Ross Gianfortune
According to the Kaiser Family Foundation, nearly 50 million Americans are enrolled in Medicare Part D plans. With the passage of last year’s Inflation Reduction Act of 2022, reforms to Medicare Part D will be enacted, so everyone – including federal annuitants – enrolled in the plan will have to pay attention to the changes.

Kevin Moss is a senior editor with Consumers’ Checkbook. Checkbook’s Guide to Health Plans for Federal Employees is available now. He’s also a GovExec contributor and his latest post on our site is headlined “How Changes to Medicare Part D Will Impact Federal Annuitants.” He joins me now to discuss his post on GovExec.com exploring the changes to Medicare Part D.

Welcome to the show.

Kevin Moss
Thanks, Ross. 

Ross Gianfortune  
 I mentioned the inflation reduction act up top. What reforms does the law bring to Medicare Part D? 

Kevin Moss
Yeah, well, I think there's there's two big ones first, it allows the federal government to negotiate drug prices. So Medicare historically has always wanted to do it. The inflation Reduction Act now allows them to negotiate prescription drug prices as part of the Part D program. But also, you know, tucked away and so that legislation were pretty major reforms in terms of how Part D will operate. Those reforms are now starting to roll out. And now federal annuitants really need to start paying attention because it feels like we're at a point where how prescription drug coverage is for annuitants the delivery mechanism of that is now going to be almost entirely different than what has happened in the past. So historically, adding Part D to your existing Medicare and D and FE HB choice was of you know, you know, probably not a great idea, mostly because you had to pay an extra premium but also because the prescription drug coverage that you would get from your Fe HB plan was as good or better than what you could find from one of the supplemental party plans. And of course, it didn't have to pay an extra premium in order to receive it. But now there's some some big changes that are happening that are going to change that dynamic. And also OPM is now offering FEHB carriers new ways to deliver prescription drug coverage because they really want federal annuitants to benefit from these party changes. 

Ross Gianfortune
You write that people maybe should expect more Fe HB Medicare Advantage Plans options. So what should people expect on that front? What's it going to look like? What are these options going to entail? 

Kevin Moss
Right, so there will there'll be three delivery mechanisms. Possibly. Some of this is a little bit speculation, but seeing what has happened in the past and understanding that when OPM issues guidance and recommendations that oftentimes the FE HB carriers will follow suit, we know a little bit about probably what 2024 and future years are going to look like. So, one, so one option for federal annuitants to get these new party benefit upgrades will be Fe HB Medicare Advantage plan. So these plans have been around for the last few years. The construction of them bundles a Part D plan, along with the Medicare Advantage plan. And these are really great deals, they have been great deals for the last few years. Not a lot of federal annuitants have gravitated to them yet. But I think more and more will and we'll see more Fe HB carriers start offering even more options, the construction of them and the requirements for them, you have to be enrolled in Medicare Part A and Medicare Part B, you stay enrolled in the FE HB plan that's sponsoring the FE HB Medicare Advantage plan. On the upside of this, the MA plan is going to reduce or in some cases entirely eliminate the Part D premium for you. Many have zero out of pocket costs except for prescription drugs. If you go to providers that accepts Medicare. And these are low cost options, just one example of that in the DC area. If you were to federal annuitants with an age 70 primary insured and you were paying the standard Medicare Part B premiums, you could save this year, almost $1,000 If you switch from BlueCross standard to a plan offered by United the primary choice retiree Advantage plan. So these were massive savings that were on the table this year. But it will be even more widely considered in future years because of these Part D benefit upgrades. Now, this choice is probably the least costly choice for almost every federal annuitant. But there are some cases where this may not be the best choice for you. So one way it may not be the best for you is if you're subject to the higher Part B premiums. So this is called Irma stands for income related monthly adjustment amount, say that five times faster. But basically, if you are a high income, individual high income family, this is 97,000. And above for individuals are 194,000 or above. For you know, for a couple This is AGI amounts, then you have to pay a higher Part B premium. And because you're getting Part D and these Medicare Advantage plans, you also are subject to the Part D are on top of that. So you're getting hit twice with higher premiums. This reduces the overall value of having Part B and joining one of these plans. Also, for Medicare Advantage plans. If you need routine overseas care, anything beyond an accident that might happen overseas, let's say you spent six months in the year in Panama, or something. If you need routine overseas care, Fe HB Medicare Advantage plans. There's only one right now, this is the United Health Care plan that offers routine overseas care. So if that's something that you need, there aren't a lot of options for that. And then you also still want to make sure that the providers that you are looking at the providers that you go to are still going to be in network for the FE HB Medicare Advantage plans. So that's one option. It's the strongest option because it doesn't consider just, you know, savings that could be had on prescription drugs. It's looking at your total healthcare costs. And those Fe HB Medicare Advantage plans are just tremendous deals. 

Ross Gianfortune 
You talked about future years. What are the changes coming in the next few years?

Kevin Moss
 Yeah, so the one that's that's out already for 2023 is a cap on insulin. So $35 No more than $35 for insulin covered by party plans. Now, the requirement Isn't that all types and brands of insulin are going to be at that $35 level. But a Part D plan at least has to cover each dosage form vial or pen. And then each type of insulin rapid acting, short acting, intermediate acting and long acting. So that's our net now that started in January, that's for insulin delivered through Part D, insulin delivered through Part B that's coming into play in July. So that's one thing that's happening right away. Next is, it's a little bit confusing the construction of how Part D plans work in terms of who pays what and when there's actually four different stages of Part D coverage. So the first stage is pre deductible, and that's where the enrollee pays 100% of all costs for prescription drugs. Once they meet the deductible, you're then in what's called the initial coverage stage. The enrollee will typically pay 25% of prescription drug expenses, the Part D plan will pay 75%. And then you get what's called the coverage gap when you're at $4,600 of expenses. And in that level, you're still paying the 25%. The Part D plans paying 5%. But then actually the pharma manufacturers paying 70% of costs. And then after you reach 7400, if you're following along, you're in what's called a catastrophic coverage phase, this is the last phase of coverage. Many people may never face this. But if you do, the enrollees still on the hook for 5% of all expenses, Medicare and the Part D plan paid 95%. Next year, that catastrophic coverage 5% contribution is going away. Next, there are provisions for Part D plans in terms of how much their premiums are allowed to grow year over year. So some people might think well, with these enhanced benefits and low cost insulin, the Part D plans are then going to raise premiums to you know, to offset that. And there are there are protections against that the party premiums can't increase more than 6%, a year from 2024 to 2030. And that's a pretty decent protect protection, because we know last year, Part D premiums on average increased 10%. So that protections in place, but the biggest change, you're going to have to wait another year for not 2024. But in 2025, there is going to be a new $2,000 enrollee out of pocket spending cap in Part D plans. And they haven't described necessarily how this will work those $2,000 of out of pocket expenses over the course of the year. So there's going to be some way for you to spread out those $2,000 across the 12 months in the year. So you're not hit with $2,000, just in one month. This is I think the biggest sort of win for enrollees who will be in a Part D plan. If you are a moderate to high prescription drug user, or you know you're taking expensive brand or specialty drugs to treat, you know, certain diseases, this will be a really important upgrade to party plans. And the $2,000 spending cap this is much lower than the catastrophic limits that you find in most Fe HB plans, which range anywhere from 1500 to up to $9,100 for using in network providers for selfing. Only enrollment. So that is the big one. It's not coming until 2025. But this needs to be in the in the back of the mind, I think of all federal new attends that these changes are coming.

Ross Gianfortune
What other considerations certainly for the next year for 2023,  and I guess to 2024, should annuitants keep in mind? 

Kevin Moss
Yeah. So OPM every year releases a letter to the carriers where they put out the goals of of what they want to see happen in the following year. And OPM recently released a couple of carrier letters that provide guidance that'll allows us to kind of see what they're thinking and how carriers will deliver benefits next year. And so one prediction that we have is that we've already talked about we think we'll see more Fe HB Medicare Advantage plans because you get a Part D plan when you join one of those and OPM is saying that they'd like to see more plans to offer those but they also have opened the door for FEHB plans to have a supplemental prescription drug plan available to to folks who are enrolled in FEHB plans. And they have said in their language that there might be automatic enrollment in those plans. Now, we don't know how this is going to work. We don't know if any carriers will take them up on the suggestion and offer auto enrollment. But certainly there's a lot of potential confusion about where am I getting my prescription drugs coverage from, you know, you might have been in the same Fe HB plan for for many years. And if you're auto enrolled into now, that plans prescription drug plan, how's that going to be communicated to you? OPM promises that prescription drug plans will be as good or better than your existing Fe HB prescription drug coverage. And you know, they could it's probably easier for them to say that in terms of the cost sharing obligations of how much it will cost to fill a brand name drug for 30 days supply. But how good a job will the plans do in terms of making sure that the Drug Formularies match between both? So if you are if you are taking prescription drugs, and you have made a decision as to what Fe HB plan you're on right now, based on how that plan covers your drug, this is something you're going to have to absolutely pay attention to that if you are going to be auto enrolled into a new Part D prescription plan that the formulary of that new Part D plan is still going to cover your drug in the same way. So you're going to have to be paying attention to that. 

Ross Gianfortune
So we'll end on the sort of why and what people should care about. You mentioned auto enrollment can annuitants be OK to keep everything the same and be fine and be okay? Or how much should they be messing around? 

Kevin Moss
Yeah, Ross. This is one of the things that is hard to say right now. And it's more of a stay tuned and make sure that you're paying attention during Open Season from from what OPM is communicating to what your FHB plan is contributing to you in terms of how prescription drug coverage is going to be delivered to you in 2024. I don't like speculating too much, because we haven't seen it yet. But what we have seen is OPM saying that this is now an option that carriers could start offering this so we don't know how many will we don't know if any will. We do know there's a lot of great provisions now in Part D plans that make these more attractive choices. However, if you are in annuitants, and if you don't take any prescription drugs, realize you can you know, do nothing. And you will pay no penalty avoiding all of this part D stuff for right now. Your existing Fe HB coverage. Prescription Drug coverage is considered credible coverage by OPM, which means that there will never be you'll never face a penalty for not joining a Part D plan right now. So if you don't take prescription drugs right now, Your situation may change in the future. And at that point, you may want to consider a Part D plan. If you have moderate to high prescription drug usage, then I think this is something that you're definitely going to want to take a look at, can I get a better deal on these expensive brand name drugs that I take by being in one of these party plans. And you're going to have to compare, you know, both this Fe HB with Part D option that may be coming, you're going to want to compare an FE HB Medicare Advantage plan to see how that will cover you. And you still have an option of joining a non Fe HB Part D plan. You can go to Medicare Plan Finder, and go and take a look and see if there's a Part D plan that will do a good job of covering your drugs a low cost. Yeah, presumably that's the kind of homework that people are going to have to do and hopefully our listeners for today. 

Ross Gianfortune
Kevin, thanks for being on the show with us. 

Kevin Moss
Yeah, thanks Ross.

Ross Gianfortune
Thanks for listening to GovExec Daily. Our show was produced and hosted by me, Ross Gianfortune. We want to thank Kevin Moss for joining the program. Our music is the song “Signals” by Catfish Dancing. Be sure to rate, review and subscribe on Apple Podcasts or Google Podcasts or wherever you get your podcasts. You can email us any feedback at podcast @ govexec.com or hit us on Twitter @ Govexec. Check us out on Facebook or LinkedIn by searching for Government Executive.

We'd love to hear from you. 
We’ll talk to you later.

https://www.govexec.com/pay-benefits/2023/03/annuitants-will-feel-impact-medicare-part-d-changes/383881/