In May of 2020, the Trump administration rolled out the Senior Savings Model–a model that will cap insulin copays at $35. Why is insulin so high in the first place, and why do many Medicare recipients need it? Furthermore, how will this new model impact your Medicare insurance in 2021? Discover how the Senior Savings Model can help save lives and save money.
Why Do Diabetics Need Insulin?
Diabetes is a disease in which your blood glucose (sugar) levels are too high. The glucose comes from the foods you eat. Insulin is the hormone that helps the glucose get into yours cells and create energy. There are two types of diabetes. With type 1, your body cannot make insulin, and with type 2, your body still makes insulin, but it doesn’t make enough of it, or your body does not use it well. Without insulin, the glucose will stay in your blood, which causes increased health risks of heart disease, kidney disease, nerve damage, or retinopathy. Finally, you can also have prediabetes. Prediabetes is where your blood sugar is higher than normal, but not high enough to be called diabetes. Most often, prediabetes leads to type 2 diabetes.
The High Price of Insulin
Diabetes has been steadily rising in our nation for decades. In fact, 1 in 3 adults have prediabetes, and 1 and 3 Medicare beneficiaries have diabetes. Therefore, the demand of insulin is incredibly high. Eli Lilly, Novo Nordisk, and Sanofi-Aventis are companies that control 90% of the global insulin market–which doesn’t help lower the costs of a high demand product.
Another reason the cost of insulin is so high, is that there is no generic insulin. Insulin is a therapeutic biological product (biologic), rather than a chemically synthesized molecule. What does this mean, exactly? Basically, insulin cannot be made as a generic in the same way that other drugs can. However, there are bio-similars. Bio-similars are products that are considered equal to insulin, but not 100% identical to the insulin they are replicating (because the biological matter is extremely complex). Not to mention, producing bio-similars typically costs as much as making the real insulin; don’t forget all the approval stages and trials a new drug is required to go through, too. Now we’re all experts on why insulin is so expensive!
If you’re an insulin-dependent diabetic, or you care for someone who is, you may be wondering how the cost of insulin impacts your Medicare Part D plan.
Welcome to Part D
In summary, Medicare plans A and B require you to pay 100% for insulin. However, unless you use an insulin pump, then you pay 20% of the Medicare-approved amount (Part B deductible applies). Also, you will pay 100% for syringes and needles, unless you have the prescription drug coverage of Medicare Part D.
Medicare Part D prescription drug plans are required to cover injectable insulin and insulin you inhale. The new Senior Savings Model program is designed to work with Part D plans, and it changes how much the drug manufacturers, and the plan sponsors, pay for insulin. We’ll quickly compare and contrast the current system with the proposed Senior Savings Model.
Current Model Phases
It’s not unheard of for the average Part D beneficiary to spend about $675 out-of-pocket (annually). Other research organizations show that up to 25% of Plan D beneficiaries could spend approximately $1,500, and nearly 5% spend approximately $2,000 annually. Wow!
Furthermore, there is a complex multi-tiered phase system that includes the deductible phase, the initial coverage phase, the coverage gap phase, and the catastrophic coverage phase. Here’s a quick breakdown:
- Plan D enrollees pay 100% of insulin costs. This means you could be accountable for approximately $435 out-of-pocket.
Initial Coverage Phase
- Plan D members pay a copayment for their insulin prescriptions. The copay varies according to the type of insulin needed. For example, a copay for a 10ml vial of brand-name synthetic analog could be $75 or more.
Coverage Gap Phase
- In this phase, Part D enrollees pay 25% of overall cost of the medication, while the manufacturer pays 75%. For example, if the vial of insulin costs $300, then you would pay $75, and the manufacturer would pay $225.
Catastrophic Coverage Phase
- If you reach the catastrophic coverage phase, you’ll pay 5% of the actual cost of insulin. The threshold to reach the catastrophic coverage phase is $6,530.
Yikes! The current multi-tiered system is so complex and costly. No wonder the current model makes it nearly impossible to budget for upcoming medical costs.
Senior Savings Model
In May of 2020, the Trump administration rolled out the Senior Savings Model–a model that will cap insulin copays at $35. Again, that’s a flat rate copayment of $35 for insulin, rather than the current 25% coinsurance amount.
Here’s how the current system works: During the coverage gap phase, drug manufacturers are currently required to pay 70% of the patients’s medication costs, while plan members pay 25%, and the Medicare pays the remaining 5%. For example, if the pharmacy charges a Medicare Part D enrollee $300 for a bottle of insulin, the drug manufacturer pays $210 dollars (70%), you would pay $75 (25%), and Part D sponsors pay $15.
Under the new Senior Savings Model, the Plan D member’s copay would be capped at the amount of $35. So who pays for the rest? The drug manufacturer would only have to pay %70 of the $35 copayment, and not for the full price of insulin. Therefore, the Plan D sponsors (private insurance companies) pay the rest. For example, if the pharmacy charges a Part D member $300 for a bottle of insulin, the drug manufacturer would be responsible for $24.50, and Part D sponsors would have to pay $265.
Medicare and Insulin
No matter which phase of Part D you are in, your insulin costs will still remain $35–even if you haven’t met your deductible! Where’s the catch? The plan premium will increase, but you’ll still be saving money. In fact, the new model could help plan members save around $446, or 66 percent, for insulin.
Beneficiaries will be able to enroll during Medicare open enrollment, which is from October 15, 2020 through December 7, 2020, for Part D coverage that begins on January 1, 2021.
At Senior Signature Solutions, we care about your health, and your budget. Contact us today if you have any questions about the Senior Savings Model, and how it can impact your Medicare insurance in 2021.