On February 9th, after a short government shutdown, Congress passed the Bipartisan Budget Act of 2018. This legislation made a lot of changes, including a few to Medicare. What do these changes mean and what other parts of this legislation might affect your retirement? Read on to find out…
What you need to know about Medicare Part D after the passing of the Bipartisan Budget Act of 2018
The largest changes in Medicare from this legislation were done to Medicare Part D. Part D, or prescription drug coverage, has always had a coverage gap, more commonly known as the “Donut Hole”.
Basically, this occurs when the beneficiary hits a point where their drug coverage is significantly lowered. In “What exactly is a Medicare Part D Prescription Drug Plan?”, I explained the donut hole more in-depth. In summary, there are 4 stages of Part D plans:
- The first is the deductible, where you pay the full amount for your prescriptions until you meet the yearly deductible amount. Some plans do not have deductibles; coverage starts immediately.
- Stage 2 is the initial coverage stage, where you either pay a copay or a percentage of the drug’s costs, or coinsurance. This lasts until you and your plan have reached a certain amount spent on covered drugs, which can change yearly. In 2017, this amount was $3,700. Once you reach this amount, you fall into the “donut hole”.
- The donut hole is basically a gap in coverage. Once you hit the donut hole, you pay a higher share of the drug costs until reaching the catastrophic coverage phase.
- In the catastrophic coverage stage, you start paying copays or coinsurance again, at an amount which is normally lower than the initial coverage stage.
The Budget Act eliminates the donut hole in 2019; it was previously set to end in 2020.
Medicare Advantage plans may now offer telehealth Medicare services starting in 2020 to chronically ill beneficiaries. Telehealth services use phone and/or online programs to deliver virtual medical services to patients. The Act also calls for the Department of Health and Human Services to develop guidelines in order to expand telehealth Medicare services to all Medicare Advantage plans in the future.
Biosimilars, which are more advanced medications than generics, will be included in the manufacture discount in the coverage gap; they previously were not. While generics use the exact same ingredients as name-brand drugs, biosimilars use different ingredients that end up doing the same thing the name-brand drug is supposed to do. Biosimilars are relatively new to the market.
Funding for outreach and assistance for low-income Medicare beneficiaries was also extended. This includes funding for many centers, including SHIP, the State Health Insurance Assistance Program.
A few other minor changes: SNPs (Medicare Special Needs Plans) are now permanent, the Independence at Home Demonstration program is extended for 2 years, and Medicare Advantage plans not must meet the needs of chronically ill enrollees within reason. The Medicare Independent Payment Advisory Board (IPAB) was also eliminated.
Changes to IRMAA under the Bipartisan Budget Act of 2018
IRMAA, or the Income Related Monthly Adjustment Amount, was also revised. IRMAA is an additional amount high-income earners pay for their monthly Medicare Part D and Part B premiums. With this act, a new tier was created for individuals with incomes of $500,000 and higher and married couples earning $750,000 and higher. They will have to pay 85% of their premium costs. Before the 2018 Budget Act, the highest tier paid 80%. This will only affect a very small percentage of Medicare Beneficiaries. If you would like to read more on IRMAA, you can do so here.
Disaster Relief and Your Retirement Plan
While legislation to cover tax relief for victims of Hurricanes Harvey, Irma, and Maria was already passed, the Budget Act expanded this to cover the California wildfire victims. These victims can now use retirement accounts without normal penalties as long as it is to cover certain expenses. This has a lot of rules and regulations in order to qualify, so make sure you consult a professional before using this strategy.
The President has released his FY2019 Budget, which includes more proposed changes to Medicare. We will make sure to monitor these and alert you to anything which might have an effect. Make sure to follow us on Facebook and subscribe to our email newsletter to be the first alerted to these changes.
Hans Scheil is the author of “The Complete Cardinal Guide to Planning for and Living in Retirement” and the accompanying workbook. He lives in Cary, NC. He can be reached at Hans@CardinalGuide.com.
