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..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 once Tier 4 drugs are noticed.

A few months ago the Boston Herald featured a story that focused on Ken Helgeson, a Medicare subscriber who unfortunately suffers from rheumatoid arthritis. His doctors prescribed him Enbrel 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, Mr. Helgeson was recently 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.

How Prescription Drugs are Covered by Medicare:

Prescription drugs are covered by Medicare’s Part D coverage.

The structure of Part D is to first ensure that private health insurers who administer prescription drug plans either through a stand-alone Prescription Drug Plan (PDP) or a Medicare Advantage Plan with prescription drug coverage (MA-PD) provide at least a standard level of coverage that applies to both generic and brand-name prescription drugs.

The Centers for Medicare Services (CMS) which oversees the private health insurers requires that each insurance firm must publish a formulary each year on which drugs they will cover and the costs of them too.

These formularies include a range of drugs in the most commonly prescribed categories and classes, and then are to be broken into three tiers.

The 3 Tiers for Prescription Drug:

  • Tier 1 – 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.

The first red-flag that retirees in Medicare should be aware of is that though the private insurance companies must create a “list” of what drugs they will cover for the year, they can change what they cover at any time.

In fact these private health insurance companies can 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 increase in co-pay or if they drop a drug altogether.  (If a particular drug is going to be dropped from coverage, a 60-day written notice to inform the beneficiary is required.)

The saving grace is that because of the separate Tiers of drugs, a similar drug is often available, but again there is always something to be aware of.

If a private health insurance company does drop a drug from its formulary and another drug does not exist, as in the case of Mr. Helgeson, the subscriber is still contractually obligated to remain with the insurance company that no longer provides the needed benefit.

Yes, you are reading this right.

Private health insurance companies can drop coverage to keep costs down but you cannot change plans during the year.

Now there is a Tier 4.

In April of 2008, a Tier 4 was created to help these private health insurance companies to specifically keep premiums down on specialty drugs that fight cancer, rheumatoid arthritis, and MS.

The logic behind the additional tier is that by spreading costs of the drugs back to you the consumer it will result in lower prices for everyone. If you have to pay for more money for a drug you will change your behavior so you you will no longer need that drug.

The other caveat to the drugs in Tier 4 and the rules set by CMS on dropping a drug – they do not apply to any drugs in Tier 4.

And shockingly when it comes to the politicians who work for the public there was no pushback from any politicians with the exception of one Sen. John Sampson of NY.

This is where Mr. Helgeson re-enters the story.

Because of the rule changes specifically for Tier 4 when the private health insurer dropped Mr. Helgeson’s Enbrel he is became fully responsible for all of the costs.

In effect if this happens to you, when it comes to your Tier 4 drugs, you will literally have no insurance helping you offset the costs.

Tier 4 drugs are not subject to any of the rules & regulations set forth by Medicare.

Insurers who provide coverage for Tier 4 drugs 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.

They can do whatever it takes to help them save money…you can NOT.

The Sad Conclusion to Tier 4 Drugs:

Mr. Hegleson is suffering because of an industry that is can make changes on the fly without any consideration to the terms that you agree too and it is all being done under 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.

The advice – either become very healthy so you never take drugs, or have absolutely no money that is visible to the IRS that way you can get your drugs for free.