Last chance to switch Medicare drug plans and save

Consumers are being bombarded by ads for blockbuster holiday sales, but most retirees may be missing out on the biggest savings opportunity of all: a chance to slash their prescription drug costs in 2023.

The annual Medicare open enrollment season, when beneficiaries can switch their stand-alone drug coverage plans or switch to a different Medicare Advantage plan that includes drug coverage, ends next Wednesday. New plan coverage begins Jan. 1.

Unfortunately, most Medicare enrollees don’t bother to compare their drug coverage options during open enrollment. That could be a particularly costly mistake this year.

The Kaiser Family Foundation says that 60% of Medicare enrollees will pay a higher premium next year for their current drug coverage. The estimated average monthly premium for Medicare Part D stand-alone drug plans is projected to be $43 in 2023, a 10% increase from $39 in 2022, the KFF report said. That 10% increase outpaces both the current annual inflation rate and the 8.7% Social Security cost-of-living adjustment for 2023.

Average monthly premiums for the 16 national stand-alone Part D prescription drug plans are projected to range from $6 to $111 in 2023. Average monthly premiums are increasing for 12 of the 16 national plans.

In addition to the monthly premium, Part D enrollees with higher incomes ($97,000 for individuals; $194,000 for couples) will pay an income-related premium surcharge, or IRMAA, ranging from $12.20 to $76.40 per month in 2023, depending on income.

Most Part D plan enrollees will also face much higher cost sharing for brands than for generic drugs, including co-insurance for non-preferred drugs next year. Close to half of all enrollees will also face coinsurance, rather than copays, for preferred brands. Coinsurance can mean less predictable out-of-pocket costs than copayments. Most Part D plan enrollees who remain in their current plan for 2023 will be in a plan with the standard maximum $505 deductible.

Beginning in 2023, Part D enrollees will pay no more than $35 per month for covered insulin products in all Part D plans, and will pay no cost sharing for adult vaccines covered under Part D. 

“Don’t underestimate the power of reviewing Medicare coverage,” said Melinda Caughill, co-founder of i65, a Medicare optimization software and consulting company that works with both consumers and financial advisers. Last year, clients engaged in Medicare review services saved an average of about $2,100 per year, Caughill said.

"The need to review Medicare coverage is much greater for some people than others,” she said.

Those who can answer yes to any of the following three questions would benefit from a Medicare review during open enrollment:
• Has it been more than two years since you  last reviewed your Medicare Part D or Advantage Plan?
• Has your health changed since you last reviewed your Medicare Plan?
• Do you take any brand-name medications, or do you take five or more medications?

One of the trends Caughill is seeing during this year’s open enrollment season: The premiums for many lower-cost plans have declined but may no longer be the best plan for most generic drugs. And she said that there's a much greater cost difference for using different pharmacies within the same prescription drug plan.

Mary Johnson, a Social Security and Medicare analyst with the Senior Citizens League, agreed that many plans aren't providing coverage for cheaper, generic versions of pricey brand drugs.

Johnson said one way to cut drug costs is to use GoodRX coupons, which may be cheaper than using a drug plan. In her own case, she found a 90-day prescription for ADVAIR, a drug used for breathing problems and chronic coughs, would cost $475 through her Part D drug plan compared to $183 for a generic substitute through GoodRX.

“The drawback is that if one purchases prescriptions not using one’s drug coverage, these costs will not count toward the annual Part D out-of-pocket threshold,” Johnson noted.

“As complex as some of the decisions are, I strongly recommend that financial advisers refer clients to free counseling sessions with trained Medicare counselors,” she said. “They can receive free one-on-one counseling through their state health insurance program."

Reviewing Medicare drug coverage options, whether in a stand-alone Part D plan or as part of an all-inclusive Medicare Advantage plan, can save clients thousands of dollars. But time is running out. Open enrollment for 2023 Medicare drug plans ends on Wednesday, Dec. 7.

(Questions about new Social Security rules? Find the answers in Mary Beth Franklin’s 2022 ebook at MaximizingSocialSecurityBenefits.com.)