Tier 4 Drugs, the rules have changed and they hurt you
Finally, the mainstream media is starting to react to the impending Medicare crisis, as more retirees are discovering that worrying about healthcare costs doesn’t stop at age 65. In fact, it is only the beginning.
Last week’s Boston Herald cover story focused on Ken Helgeson, a Medicare subscriber who unfortunately suffers from rheumatoid arthritis. His doctors prescribed him Enbrel (cost in 2020 $2,910 for 4 units) to help him cope with his increasingly worsening conditions, and the drug practically saved his life.
“After the first week or 10 days, it was a miracle. I was riding my bike. I painted my house,” he recalled.
Unfortunately, Helgeson was informed that his co-pay for the drug had skyrocketed from about $42 a month to $600 a month, an amount he simply cannot afford. The Ken Helgesons of the Medicare world, and there are many, are starting to face a new reality: there are high costs associated with specialty drugs, and those prices can change without warning.
The article has received some attention, and many subscribers are assuredly wondering, “If it happened to him, could it happen to me as well?” To answer this question, we must investigate how prescription drugs are covered by Medicare, and then draw a correlation as to whether these drugs are covered for those who suffer from the most prevalent chronic illnesses.
Prescription drugs are covered by Medicare Part D, a relatively new descendant from the 2003 legislative bill entitled the Medicare Prescription Drug, Improvement, and Modernization Act. By 2006 the first prescription drug benefits were rolled out to the retired public.
The structure of Part D is to have each Medicare prescription drug plan and Medicare Advantage plan with prescription drug coverage (MA-PD) provide at least a standard level of benefits that apply to both generic and brand-name prescription drugs.
Each insurance firm that provides coverage must publish a formulary each year. These formularies included a range of drugs in the most commonly prescribed categories and classes, and are broken into three tiers:
- Tier 1 – usually generic drugs with the lowest co-pay
- Tier 2 – brand name drugs with a co pay of roughly $15 – $50
- Tier 3 – brand name drugs with a high co pay of roughly $50 – $75
Part D is administered by private insurance companies who must create a “list” of what drugs they will cover for the year (a formulary), but, please note that the insurance companies can change this list at any time.
Insurance companies are currently allowed to adjust each plan midyear, but they do have to seek approval from Medicare if changes are going to negatively impact the consumer, such as an increased co-pay or dropped coverage. If a particular drug is going to be dropped from coverage, a 60-day written notice to inform the beneficiary is required.
Fortunately, because of the separate categories and classes, a similar drug is often available; however, if one does not exist, and the specialty drug is no longer insured for the term of the contract (as is the case with Mr. Helgeson) the subscriber is still contractually obligated to remain with the insurance company that no longer provides the needed benefit. Yes, you read that right: they don’t have to hold up to their end of the bargain, but you do.
In essence, insurance companies can adapt to keep costs down, a subscriber cannot.
Then there is a fourth tier.
In April of 2008, insurers created a fourth tier to keep premiums down on specialty drugs that fight cancer, rheumatoid arthritis, and MS. The logic behind the additional tier was that spreading costs of the drugs back to the users would result in lower prices for everyone. Apparently, there was no pushback from any politicians with the exception of Sen. John Sampson of NY.
This is where Mr. Helgeson re-enters the story.
This fourth tier, and Mr. Helgeson’s Enbrel, is not subject to any of the rules & regulations set forth by Medicare. Insurers no longer have to wait until midyear to make changes to a plan. They no longer have to get approval from Medicare or inform beneficiaries of any cost changes.
But you guessed it – the subscriber still has to adhere to the contract that he or she has signed.
Mr. Hegleson got hit by an industry that is allowed to make changes on the fly without any consideration to the terms that were agreed upon—all behind the guise of “keeping healthcare costs down.”
Back to the question, “Will it happen to me?” The answer is increasingly leaning towards yes. With science creating new drugs each day to cure even the most deadly diseases, there will always be a drug company charging as much as politicians will allow them to.
Don’t believe it? Just read some comments posted on www.inspire.com, a website for those battling lung cancer.
-It’s very obvious that they are pricing health care so high that some of us will have no choice but to die off.
-I just read the co-pay on dialysis and it’s $25.00 per visit. My brother in law has to have it 3 times a week. That’s $75.00 a week. So it’s to the point where we will be choosing to eat or have health care.
-Our books came the last of last week while we were visiting our daughter. The last few days I have been going through them and I am totally shocked at the explosive prices. Last year a CT scan co pay was $40.00. This year they were $80.00 and next year they will be $100.00.
-How can people on fixed incomes pay these prices?
-I guess they are telling us we have lived long enough.
Planning for healthcare is not just a line item in a financial plan, healthcare is retirement, especially if you live long enough or take any prescription medications. Just don’t ask anyone to help you plan for this though, they will most likely just want to talk about the rate of return you will get.
Article was originally written in 2014. Since then the insurance companies, with government approval created Tier 5 and 6 drugs or “injectables”. The main reason why the Epipen became so expensive.