Changes to Part D prescription drug plans in 2014 that every adviser should know

Want to give your retired clients a reason to count you among their blessings this Thanksgiving? Offer them a few tips on how they could save money on their prescription drugs next year by shopping for a new Medicare Part D plan now.

Although most Medicare beneficiaries never switch plans, as I mentioned in a recent column, it can be a costly mistake. This year, there are more reasons than ever for seniors and people with disabilities who rely on Medicare to review their coverage during the annual open enrollment season, which runs through Dec. 7, 2013.

Plan costs, drug coverage and trigger points for the donut hole are all changing next year. In addition to changes in existing plans, more than 200 new Part D plans are being offered for 2014 and nearly 50 plans are leaving the market.

“Anytime a Part D plan closes down, Medicare participants who were in that plan have a valuable opportunity and should take advantage of this change to study their options,” said Paula Muschler, operations manager of the Allsup Medicare Advisor, a Medicare plan selection service that offers personalized help for consumers and financial advisers. “They may have some great new plans to choose from for 2014,” Ms. Muschler said.

Allsup provided a list of some of the changes to Medicare Part D plans and premiums that will take effect next year.

• The Part D monthly premium will increase 4% to $32.42 in 2014, up from $31.17 in 2013. Some higher-income beneficiaries will pay more.

• More insurers are featuring Part D plans with preferred pharmacy networks, in which the plan provides cost discounts for using that specific pharmacy chain.

• There will be changes to the prescription drug “donut hole” in 2014. That's the gap in coverage when Medicare beneficiaries have to pay a greater portion of their drug costs. The initial coverage limit will start at $2,850, $120 less than this year, meaning more people could end up in the coverage gap sooner.

&bull: But those who fall into the donut hole will pay less for their generic drugs in 2014 than this year — 72% of the costs versus 79% today. Their share of brand-name drug costs will remain the same at 47.5%.

Nearly 2.8 million people reached the donut hole in the first nine months of 2013, an increase of nearly 22% over 2012, according to the Centers for Medicare and Medicaid Services.

Ms. Muschler offered several reasons why your clients might want to shop for a new Medicare D plan during the current open enrollment season.

• Medicare Part D plan costs can change over time. Costs for prescription drug coverage include the premium, deductible and co-pays or coinsurance. Medicare participants may be able to reduce costs