While a recent report by the Center for Medicare and Medicaid Services (CMS) shows that Part D premiums will increase by an average of 5 percent in 2014, many retirees will actually be able to save money on prescription drugs in the New Year.
Due to changes mandated by the Affordable Care Act, individual responsibilities for brand-name and generic drugs will gradually reduce over the next several years, the report states. Annual changes to specific Part D plans will also allow savvy users to keep costs low as their prescriptions change. To take advantage of all these savings, however, seniors will need to pay close and continual attention to their needs, options and total costs.
One of the ACA’s greatest effects on Part D is its gradual closing of the “doughnut hole”— the coverage lapse that occurs when users exceed their monthly drug benefits. In 2013, anyone who exceeded $2970 in drug costs was then responsible for 47.5 percent of their brand-name drugs and 79 percent of their generics. According to CMS, in 2014, brand-name responsibilities will remain the same, while responsibilities for generics will be reduced to 72 percent. By 2020, Medicare users will only have to pay 25 percent for both brand-name and generic drugs once they exceed the monthly limit. Planner should note, however, that the starting point for the coverage gap is subject to change, and that it will be lowered to $2850 in 2014.
Despite the expected increase in monthly premiums, lower deductibles and co-pays—as well as access to different pharmacies—may help many seniors realize net reductions in their drug-related costs. “You might pay a higher premium, but you’ll pay less for drugs over time,” said Sarah O-Leary, healthcare advocate and founder of Exhale Health. “What you really want to look at is your estimated total out-of-pocket costs for each year.”