As politicians begin to consider cuts to federal entitlements, one item appears to be totally off-limits. That's the Medicare Part D prescription drug benefit, the most popular new entity created since 1965, and also the most costly.
Through Part D premiums, seniors pay 25 percent of the total cost of Part D (about $1,800 per participant per year), with virtually all of the rest coming from automatic annual Treasury appropriations. Over the next decade, the Medicare trustees expect Part D spending to increase by 9.5 percent per year, and the total pay-as-you-go cost to the U.S. Treasury, including interest, will be about $1 trillion.
Of course, Part D has been fantastic for seniors and pharmaceutical companies. The average weighted monthly Part D premium has increased gradually from $26 in 2006 to about $39 in 2014. (High-income seniors now pay more.)
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Under the Affordable Care Act, the "donut hole" will be a bit smaller in 2014, starting at total drug spending of $2,850 and extending to $4,550 (compared to $2,970 and $4,750 in 2013). The Part D deductible will fall from $325 in 2013 to $310 in 2014.
You can help your older clients evaluate Part D options during the open enrollment period that continues through December 7. Since a number of plans have changed or closed since last year, you may want to direct clients to the government's Medicare Plan Finder.
You also may want to educate younger clients about Medicare Part D – by letting them know it's probably not sustainable in its present form beyond the next decade or so.
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