Does it make sense to buy Part D if you are subject to IRMAA?

[LSLover]

Those of you who are subject to IRMAA, do you buy Part D?

As there is no additional IRMAA-related penalty for late enrollment in Part D, simple math suggests that buying Part D when a need arises makes more sense. Anyone did an in-depth analysis on that?

[jebmke]

Those of you who are subject to IRMAA, do you buy Part D?

As there is no additional IRMAA-related penalty for late enrollment in Part D, simple math suggests that buying Part D when a need arises makes more sense. Anyone did an in-depth analysis on that?

I have thought about doing this but deferred a decision this year out of laziness. My policy isn't very expensive but I use almost nothing. I think my summary last year showed the insurance paying 83 cents.

[Big Dog]

don't forget that you will be subject to a late enrollment penalty if you do not sign up for Part D after initial enrollment period.

Personally, I purchased the cheapest Rx plan available (as I take no meds).

https://www.medicare.gov/drug-coverage- ... nt-penalty

[Good Listener]

Yes it makes sense. I pay maximum IRMA and I assume if you are subject to IRMAA you can afford it. To wait until "you need it" is opposite the concept of insurance. I wouldn't save nickels to risk dollars.

[LSLover]

don't forget that you will be subject to a late enrollment penalty if you do not sign up for Part D after initial enrollment period. And that penalty is for life. (perhaps waived if you switch to a Medicare Advantage plan?)

https://www.medicare.gov/drug-coverage- ... nt-penalty

Late enrollment penalty is 1% per month off base ($33.19 in 2019). Delaying Part D purchase by 5 years will lead to 60% penalty which is about $20 per month. If you are even just in the second tier of IRMAA your monthly premium is $32 and that’s not counting whatever plan you buy (the least expensive plan I found is $14/mo). So, you are saving $46 ($32+$14) every month while your penalty after 5 yrs is only $20/mo. If you don’t use Part D, it makes no sense to keep it until you need it, at which time you can sign up for it at the end of a year.

What am I missing?

[LadyGeek]

This thread is now in the Personal Finance (Not Investing) forum (insurance).

[quantAndHold]

In response to someone the other day asking “what causes a $1M medical bill,” I did some googling, and apparently $80,000 prescription meds are actually a thing. I suspect if you need a $80k prescription med, you’re not going to want to wait until the next open enrollment to get it, since the really expensive meds are mostly to treat blood disorders and cancers.

I would just go for the cheapest plan.

[LSLover]

In response to someone the other day asking “what causes a $1M medical bill,” I did some googling, and apparently $80,000 prescription meds are actually a thing. I suspect if you need a $80k prescription med, you’re not going to want to wait until the next open enrollment to get it, since the really expensive meds are mostly to treat blood disorders and cancers.

I would just go for the cheapest plan.

The problem with that theory is that only more expensive plans cover those $80,000 drugs. Which makes the math even more disadvantageous...

[bikechuck]

Interesting thread. What if you get a devastating illness and need expensive meds in the middle of a year? Or what if you are hospitalized and given drugs to stabilize you and control pain?

Can you sign up for part D in mid year or only during an open enrollment period which I think is Oct 15 - year end?

I would assume drugs given in an emergency hospitalization would not be covered since you bought part D after the fact. Is that correct?

I will be subject to IRMAA when RMDs kick in so I would be interested in comments re the above.

[LSLover]

Interesting thread. What if you get a devastating illness and need expensive meds in the middle of a year? Or what if you are hospitalized and given drugs to stabilize you and control pain?

Can you sign up for part D in mid year or only during an open enrollment period which I think is Oct 15 - year end?

I would assume drugs given in an emergency hospitalization would not be covered since you bought part D after the fact. Is that correct?

I will be subject to IRMAA when RMDs kick in so I would be interested in comments re the above.

If you are hospitalized your drugs are being covered by Part B or Part A anyway. Part D is ONLY for the outpatient needs.

Yes, you can only sign up once a year Oct.15 - Dec.7.

[Salmon Maki]

“The problem with that theory is that only more expensive plans cover those $80,000 drugs. Which makes the math even more disadvantageous...”

This isn’t true at all. For example, many of these expensive drugs are cancer drugs, which are required to be covered by all Part D plans. Also, even drugs that “aren’t covered” by a plan will be covered after appeal if they are Part D-eligible drugs being used for medically-supported uses.

[Wricha]

Those of you who are subject to IRMAA, do you buy Part D?

As there is no additional IRMAA-related penalty for late enrollment in Part D, simple math suggests that buying Part D when a need arises makes more sense. Anyone did an in-depth analysis on that?

IRMAA ! I am just about over it (not quite). As you know it shocking how much you end paying for a “benefit”. I always had a very high deductible health plan for many years. So when it came to part D I thought as you did, I’ll roll the dice. The reason I ended up buying the cheapest drug plan was.
It is difficult to get accurate information from Medicare when it involves anything other than regular Medicare. When you mention IRMAA almost no one on the other end of the phone has a clue. As women told me it affects less than 5% of people so it’s not that important and she genuinely meant it.
The main reason (not a politically statement) is that policy markers can make changes to the existing system. These changes may have unintended consequences for those people who are playing outside the rules. Not a lot of activists for the IRMAA Coalition.

[oxothuk]

Not a lot of activists for the IRMAA Coalition.

I’m not too bothered by the notion of higher premiums for those of us with higher incomes.
My primary beef with IRMAA is its “cliff effect”, and the mental energy required to stay on the right side of its bracket boundaries.

[mhalley]

As someone paying $2845 a month for lousy insurance, I will jump off the irrma cliff gladly

[Wricha]

Not a lot of activists for the IRMAA Coalition.

I’m not too bothered by the notion of higher premiums for those of us with higher incomes.
My primary beef with IRMAA is its “cliff effect”, and the mental energy required to stay on the right side of its bracket boundaries.

If your not worried about higher premiums why in the world would you be trouble by the cliff effect? Pay the premium and be happy.

[Retired1809]

I'm certainly subject to IRMAA and have a Medicare Advantage plan. I have never spent more than $100 in a year for prescriptions. But because insurance is for unexpected (unknown) expenses instead of expenses based on past experience, I believe in Medicare Advantage plans or other drug plans. So I pay high IRMAA every year. Am I making a mistake?

[The Wizard]

...So I pay high IRMAA every year. Am I making a mistake?

No.
It's people like us that keep the system solvent...

[Stinky]

I'm certainly subject to IRMAA and have a Medicare Advantage plan. I have never spent more than $100 in a year for prescriptions. But because insurance is for unexpected (unknown) expenses instead of expenses based on past experience, I believe in Medicare Advantage plans or other drug plans. So I pay high IRMAA every year. Am I making a mistake?

I’m in the same boat - Medicare Advantage and high IRMAA.

I don’t believe that either you or I am making a mistake.

[LSLover]

Just came across this: http://truecostofhealthcare.org/part-d-case-study/

The author, David Belk, MD, makes an argument that Part D is useless. Adding the IRMAA surcharge (while he doesn’t discuss that) makes it even more convincing to me that Part D for those in high IRMAA is just a waste of money...

[dm200]

I think (correct me if I am wrong) that part D of Medicare is not subsidized by Medicare.

I am not subject to IRMAA.

I have part D coverage with my Kaiser Medicare plan, as does my wife.

If I am reading the coverage choices correctly, then we pay $11 per month for our part D coverage. This year, I am taking two more regular prescription drugs. I have not compared whether this $11 per month ($132 per year) actually save me month or not. One prescription I take is actually in the ZERO cost tier. It is a generic and probably would cost about $60 - $70 per year without insurance. So, my guess is that I am now financially benefiting from Part D. Not sure about my wife. She takes 2 or 3 prescription drugs and gets one at the zero price tier as well.

While my opinion is that choosing part D is a good idea, the chance of a very expensive prescription drug need is quite low (BUT not zero!) so skipping part D might possibly make some sense for those with very adequate assets/income and who are subject to IRMAA.

[cherijoh]

What am I missing?

The possibility that you have no Part D coverage and need an expensive chemo drug?

Just because you haven't needed any maintenance drugs up until now doesn't ensure you won't need some expensive drugs before the next open enrollment period.

[adamthesmythe]

Interesting thread. What if you get a devastating illness and need expensive meds in the middle of a year? Or what if you are hospitalized and given drugs to stabilize you and control pain?

Can you sign up for part D in mid year or only during an open enrollment period which I think is Oct 15 - year end?

I would assume drugs given in an emergency hospitalization would not be covered since you bought part D after the fact. Is that correct?

I will be subject to IRMAA when RMDs kick in so I would be interested in comments re the above.

If you are hospitalized your drugs are being covered by Part B or Part A anyway. Part D is ONLY for the outpatient needs.

Yes, you can only sign up once a year Oct.15 - Dec.7.

I believe that many cancer treatments, including those using very expensive drugs, are done at least partly on an outpatient basis.

[mhalley]

Everyone complains about IRMAA, but even at the the maximum Medicare is drastically cheaper than what you would pay for an aca plan. My wife and I are paying 2845 a month for insurance that doesn’t pay a penny till 6500 out of pocket. Think what that would be if we were 70, 75, 80? I look forward to those increased IRMAA premiums later this year.
There are many other drugs besides cancer drugs that are astronomical. My fil dr recommended a lung drug that was 4K a mo. Also, hopefully they will finally develop something for altzheimers that actually works, and I am sure it won’t be cheap.

[dm200]

Everyone complains about IRMAA, but even at the he maximum Medicare is drastically cheaper than what you would pay for an aca plan. My wife and I are paying 2845 a month for insurance that doesn’t pay a penny till 6500 out of pocket. Think what that would be if we were 70, 75, 80?

Yes - indeed.

[LSLover]

Interesting thread. What if you get a devastating illness and need expensive meds in the middle of a year? Or what if you are hospitalized and given drugs to stabilize you and control pain?

Can you sign up for part D in mid year or only during an open enrollment period which I think is Oct 15 - year end?

I would assume drugs given in an emergency hospitalization would not be covered since you bought part D after the fact. Is that correct?

I will be subject to IRMAA when RMDs kick in so I would be interested in comments re the above.

If you are hospitalized your drugs are being covered by Part B or Part A anyway. Part D is ONLY for the outpatient needs.

Yes, you can only sign up once a year Oct.15 - Dec.7.

I believe that many cancer treatments, including those using very expensive drugs, are done at least partly on an outpatient basis.

Correct, in fact most cancer drugs are administered on the outpatient basis and are covered by Part B.

[LSLover]

What am I missing?

The possibility that you have no Part D coverage and need an expensive chemo drug?

Just because you haven't needed any maintenance drugs up until now doesn't ensure you won't need some expensive drugs before the next open enrollment period.

You may want to read what Medicare.gov says about the chemo drug coverage here:
https://www.medicare.gov/coverage/chemotherapy

[nisiprius]

He gives an example of a patient who spent $3,374.40 for three months, and so did not exceed the $5,100 out-of-pocket cap.

The catastrophic coverage doesn't kick in until you've paid $5,100. Above that, my plan says it pays 95% (5% co-pay).

He says that he encouraged her to get the prescription for, I assume, $843/month at Costco. But since it wasn't being bought through the part D plan, it presumably would not count toward the $5,100 out-of-pocket cap.

My back-of-the-envelope calculations suggest that--ignoring her other medications--if she needed the medication for a year, it would have cost 12 x $846 = $10,152 total.

If she stayed on the plan for a year, it would have cost her $3,374/3 per month = $1,125/month for 5 months, at which point she would have spent $5,625 and be into the catastrophic coverage. Her cost for the rest of the year would be 7 x $1,125 x 5% = $393.75. So the total for the year would be $6,018.75.

One can fiddle with the details, and she didn't start at the beginning of the year, and I don't know how long she's likely to need the drug, but, clearly, this is a drug that can easily put you into the catastrophic coverage stage. And, almost certainly, if you need the drug for a full calendar year, buying it via part D would be cheaper than buying it without insurance at the discounted price.

So, all this sucks, but this is like much insurance. It seems like a bad deal if you don't seriously acknowledge the risk of catastrophic costs.

What the article is saying is that assuming you don't use the catastrophic coverage, then part D isn't a good deal. It is quite true that part D is complex and obfuscated. It is quite true that, like too many forms of insurance, it has a complex zone in which it is acting more like simple prepayment, with the illusion that you are getting something out of it when you are just kind of getting your own premiums being paid back to you, and that sucks.

But the article implies, without saying so, that the catastrophic coverage provision of part D is of no value.

Yeah, part D sucks. That doesn't mean it's so bad that you shouldn't have it.

Let me be blunt: the catastrophic coverage provision is the only reason we have part D. I have no statistics on how often it gets used and whether it works as expected when it does get used.

His article completely fails to speak to the main point, because he only discusses costs that are in the "great big nuisance" category, not the "catastrophic, go-bankrupt" category. In other words, he's not discussing the situation that would factor into my purchasing decision.

He's talking about numbers like $1,000/month. That's bad, but we're in good shape and we could hack $1,000/month out of pocket. But not, say, $10,000 a month.

Prove to me that there's no credible possibility that I could ever need a Tier 5, $10,000/month drug that wouldn't be covered under part A or B. Show me some statistics about how often people use the part D catastrophic coverage.

[sandramjet]

I guess I don't understand how IRMAA plays into this? (Serious question, I don't get that connection)

Isn't this the same as asking "Should I buy Part D"? And doesn't that just depend on whether you have other coverage or resources for drug coverage?

[nisiprius]

I guess I don't understand how IRMAA plays into this? (Serious question, I don't get that connection)

Isn't this the same as asking "Should I buy Part D"? And doesn't that just depend on whether you have other coverage or resources for drug coverage?

I think it's a coy way of saying "high income" (so not qualified for low-income subsidies or middle-income "extra help.") Because obviously part D is worth it if you get the low-income subsidies.

[dm200]

I have never had it apply, but some (not many) prescription drugs are covered by Part B.

[gizzsdad]

I think (correct me if I am wrong) that part D of Medicare is not subsidized by Medicare.

You are not correct. Part D is highly subsidized. That is a big part of why the IRMAA is applied to Part D, as well as to Part B.

[quantAndHold]

Let me be blunt: the catastrophic coverage provision is the only reason we have part D. I have no statistics on how often it gets used and whether it works as expected when it does get used.

His article completely fails to speak to the main point, because he only discusses costs that are in the "great big nuisance" category, not the "catastrophic, go-bankrupt" category. In other words, he's not discussing the situation that would factor into my purchasing decision.

He's talking about numbers like $1,000/month. That's bad, but we're in good shape and we could hack $1,000/month out of pocket. But not, say, $10,000 a month.

Prove to me that there's no credible possibility that I could ever need a Tier 5, $10,000/month drug that wouldn't be covered under part A or B. Show me some statistics about how often people use the part D catastrophic coverage.

http://files.kff.org/attachment/Issue-B ... n-Spending

Looks like about 10% of enrollees hit the catastrophic coverage limit.

[dm200]

I think (correct me if I am wrong) that part D of Medicare is not subsidized by Medicare.

You are not correct. Part D is highly subsidized. That is a big part of why the IRMAA is applied to Part D, as well as to Part B.

Where does this "subsidy" come from?

[jebmke]

I think (correct me if I am wrong) that part D of Medicare is not subsidized by Medicare.

You are not correct. Part D is highly subsidized. That is a big part of why the IRMAA is applied to Part D, as well as to Part B.

Where does this "subsidy" come from?

I think it comes from CMS. Presumably it is funded by the IRMAA upcharges that the rest of us pay.

[cas]

I think (correct me if I am wrong) that part D of Medicare is not subsidized by Medicare.

You are not correct. Part D is highly subsidized. That is a big part of why the IRMAA is applied to Part D, as well as to Part B.

Where does this "subsidy" come from?

Depends what you (dms200) initially meant by "not subsidized by Medicare." It is true that Part D (as well as Part B) is not subsidized by the Medicare Trust Fund (Medicare payroll taxes). Only Part A is.

Both Part B and Part D are, however, subsidized from "general revenues" (i.e. income taxes).

Most Medicare beneficiaries pay the standard monthly premium, which is set to cover 25 percent of Part B and Part D program costs, but higher-income beneficiaries are required to pay a larger share of program costs.

(Source: "Medicare’s Income-Related Premiums Under Current Law and Changes for 2019", Kaiser Family Foundation Issue Brief, October 2018, https://www.kff.org/medicare/issue-brie ... -for-2019/ )

Part B is financed through general revenues (71 percent), beneficiary premiums (27 percent), and interest and other sources (2 percent). Beneficiaries with annual incomes over $85,000/individual or $170,000/couple pay a higher, income-related Part B premium reflecting a larger share of total Part B spending, ranging from 35 percent to 80 percent; the BBA [Bipartisan Budget Act] of 2018 created a new premium level of 85 percent for those with incomes at or above $500,000/individual and $750,000/couple, which will take effect in 2019.

Part D is financed by general revenues (73 percent), beneficiary premiums (15 percent), and state payments for beneficiaries dually eligible for Medicare and Medicaid (11 percent). Higher-income enrollees pay a larger share of the cost of Part D coverage, as they do for Part B.

(Source: "The Facts on Medicare Spending and Financing", Kaiser Family Foundation Issue Brief, June 2018, https://www.kff.org/medicare/issue-brie ... financing/ )

[Nowizard]

We do buy Part D. Taking minimal meds, we purchased a basic policy at $15.50 monthly in my case. It covers basic generics such as the common statins, antibiotics and BP meds, and our return has been greater than the cost. The more important consideration, however, is that if one of us experienced an unanticipated illness that required an expensive medication, you can petition during that coverage year for your Part D provider to cover it even if not on their formulary. Basically, our plan is to research each year and obtain coverage at the lowest cost for the medications taken at the time of choosing a policy. For example, one of us had a $15.00 or so policy last year and required a medication that was on the formulary but had a monthly $180 cost for us. This year, the policy we switched to has a $30.50 monthly charge but the same medication is $20 monthly. So, the policy cost is approximately $186 more annually, but the specific medication is a whopping $1,920 less (180 X 12 = $2,160 vs.$20 X 12 = $240).

Tim

[nisiprius]

...http://files.kff.org/attachment/Issue-B ... n-Spending

Looks like about 10% of enrollees hit the catastrophic coverage limit.

So, let's see if I have this right.



If people were spending $6,700 out of pocket, then $6,700 - $5,100 = $1,600 of that was 5% co-pays, so the full cost of the prescription drugs on which they made the co-pay would have been $32,000. Plus $5,100 in out-of-pocket spending to reach the catastrophic coverage threshold.

So, with part D they paid $6,700 and without it they would have paid $37,100, or something like that.

The point of the paper is that even with the catastrophic coverage and the seemingly-low 5% co-pay, "Medicare Part D Enrollees Exposed to High Out-of-Pocket Drug Costs Without a Hard Cap on Spending." In other words, Medicare Part D sucks and isn't providing adequate protection against catastrophic prescription drug costs. But it still seems to me that, as far as I'm concerned, the risk of having to pay $37,100 rather than $6,700 justifies buying part D.

[quantAndHold]

...http://files.kff.org/attachment/Issue-B ... n-Spending

Looks like about 10% of enrollees hit the catastrophic coverage limit.

So, let's see if I have this right.



If people were spending $6,700 out of pocket, then $6,700 - $5,100 = $1,600 of that was 5% co-pays, so the full cost of the prescription drugs on which they made the co-pay would have been $32,000. Plus $5,100 in out-of-pocket spending to reach the catastrophic coverage threshold.

So, with part D they paid $6,700 and without it they would have paid $37,100, or something like that.

The point of the paper is that even with the catastrophic coverage and the seemingly-low 5% co-pay, "Medicare Part D Enrollees Exposed to High Out-
of-Pocket Drug Costs Without a Hard Cap on Spending." In other words, Medicare Part D sucks and isn't providing adequate protection against catastrophic prescription drug costs. But it still seems to me that, as far as I'm concerned, the risk of having to pay $37,100 rather than $6,700 justifies buying part D.

I was very surprised that the percentage of people who hit the catastrophic limit was so high. I suspect that percentage will go higher in their next report, when the result of the recent price spikes in insulin gets factored into the data.

I have a friend on one of the expensive leukemia drugs (no idea which one exactly). The full cost of the drug is $72k per year. She will be on either that drug or something similar for the rest of her life.

[Artsdoctor]

I can assure you that there are many medications that are extremely expensive which have nothing to do with cancer. Some will be used in the short term, some in the medium term, and some perpetually. Part D premiums are not that expensive even with IRMAA although the plans leave a lot to be desired. But I wouldn't fall into the trap of thinking that an "expensive illness" couldn't happen to you.

[fru-gal]

“The problem with that theory is that only more expensive plans cover those $80,000 drugs. Which makes the math even more disadvantageous...”

This isn’t true at all. For example, many of these expensive drugs are cancer drugs, which are required to be covered by all Part D plans. Also, even drugs that “aren’t covered” by a plan will be covered after appeal if they are Part D-eligible drugs being used for medically-supported uses.

They may be required to be covered, but at what rate. I think the highest tier meds in my plan require the patient to pay 1/3 the cost, or something like that. 1/3 of astronomical is astronomical.

[fru-gal]

I can assure you that there are many medications that are extremely expensive which have nothing to do with cancer. Some will be used in the short term, some in the medium term, and some perpetually. Part D premiums are not that expensive even with IRMAA although the plans leave a lot to be desired. But I wouldn't fall into the trap of thinking that an "expensive illness" couldn't happen to you.

This reminds me that an antibiotic I took for a week cost $800.

[Broken Man 1999]

Part D coverage decision is no different than other insurances one buys to shift the risk elsewhere.

There are many Part D providers that have a low premium. You don't know if you need a particular type insurance until you do.

The penalty amounts aren't terrible, but when can you add coverage should you need it suddenly?

Don't you have to wait until the next enrollment, or, can you simply add Part D when you want? Seems you would have to wait until next enrollment, or else that would make Part D subject to gaming the coverage. Hopefully the government isn't that foolish.

So, the risk of higher premiums is real, but the risk of needing high-priced drugs for some reason seems as though it could be very expensive in comparison.

Broken Man 1999

[nisiprius]

“The problem with that theory is that only more expensive plans cover those $80,000 drugs. Which makes the math even more disadvantageous...”

This isn’t true at all. For example, many of these expensive drugs are cancer drugs, which are required to be covered by all Part D plans. Also, even drugs that “aren’t covered” by a plan will be covered after appeal if they are Part D-eligible drugs being used for medically-supported uses.

They may be required to be covered, but at what rate. I think the highest tier meds in my plan require the patient to pay 1/3 the cost, or something like that. 1/3 of astronomical is astronomical.

Until the out-of-pocket total hits $5,100, and then beyond that point you are dealing with only 5% of astronomical.

Incidentally, didn't it used to be 2.5% co-pay for the "catastrophic" coverage level? Anyone know why it was raised from 2.5% to 5%?

[gizzsdad]

Don't you have to wait until the next enrollment, or, can you simply add Part D when you want?

There are some SEP (special enrollment periods) that can be utilized between AEP's.

Unless I missed it, I haven't seen any discussion of the SEP that applies to five-star rated plans. If your health situation changes and requires a change in your meds, and you are fortunate enough to be in a region that offers a five-star plan, you have a one time option to switch to that plan mid year.