How Unexpected Medicare Drug Prices Can Derail Even The Most Comprehensive Financial Plan

Christine Simone
November 7, 2021

Medicare is the single largest health insurance program in the US, and it provides medical coverage for millions of individuals who otherwise might not be able to afford insurance – or would live a significantly different lifestyle if they had to pay for private insurance. Alongside the (relatively, depending on your income) low monthly premiums, Medicare provides a wide range of coverage in both public and private sectors.

But Medicare, like any type of insurance, isn’t perfect. It’s a complex system, and understanding and enrolling in the right Medicare benefits is difficult for even the savviest individuals. Medicare also doesn’t cover everything. 

When you take the first steps to enroll in Medicare (Parts A and B), it doesn’t cover prescription drugs. To get drug coverage, individuals have to enroll separately in Medicare Part D or a Medicare Advantage Plan (Part C) that includes drug coverage. (Not to mention, they have to enroll in drug coverage benefits when they first become eligible for Medicare to avoid lifetime penalties.)

As a comprehensive financial advisor, you’re likely very familiar with clients’ struggles when it comes to Medicare, and you’re probably the first person they come to with questions about their benefits. This makes sense, as Medicare prices and coverage have a huge impact on their overall financial plan for retirement. 

But it’s tough to be an expert in such a complex health insurance program.

How Medicare Drug Prices Complicate Planning for Comprehensive Financial Advisors

Ensuring timely enrollment in Part D or an appropriate Medicare Advantage plan is only half the battle for financial advisors. Although convincing every client to enroll in a Medicare plan that includes drug coverage can be a struggle, it isn’t the only thing your clients need to worry about. 

Like all insurance plans, Medicare Part D doesn’t cover all prescription drugs. And unlike employer-sponsored health insurance plans, Medicare does not place a cap on out-of-pocket costs for drugs. This means that out-of-pocket costs for some essential drugs can be absolutely enormous – and unaffordable – for many individuals. 

The cost of necessary prescription drugs, which can amount to tens of thousands of dollars per year or more in some cases, can have a significant impact on your clients’ financial plan. If you don’t catch this in time, both you and your clients may not know what to do about it. In a worst-case scenario, the cost of prescription drugs under Medicare could derail your client’s entire financial plan, leaving you scrambling to make adjustments.

To see this problem in action, keep reading to find out what happened to Rob and Laura, who were blown away by the exorbitant cost of Laura’s necessary medication to manage a chronic condition. Fortunately, Rob and Laura’s financial advisor, in partnership with Caribou, was able to help them figure out strategies to overcome this Medicare nightmare.

Meet Rob and Laura

Rob and Laura, a couple in their mid-sixties, live in Illinois and are getting ready to retire later this year. As a busy engineer in a high-stress job, Rob is looking forward to retirement and having more time to spend with this family. The couple has been working with a financial advisor, Kim, to prepare for this life transition. They are waiting to retire until they turn 65 so they don’t have to worry about filling a gap in health insurance coverage.

Laura, a retired teacher, lives with a chronic health condition that she manages with a single prescription medication. Under Rob’s employer-sponsored health insurance plan, the couple had no problems paying for the medication she needed to manage her condition. Because Rob’s employer-sponsored health plan has a cap on drug prices, they knew they would reach that every year, and then all drugs would be covered at 100% thereafter. 

Luckily, Kim works with Caribou to assist her in planning for clients’ health care expenses, including Medicare coverage. Throughout the planning, Caribou identified that the cost of Laura’s medication while on Medicare was exorbitant (see below for the exact annual cost)  and it would materially alter the couple’s financial plan.  

Rob and Laura’s Unwelcome Surprise: Medicare Drug Prices

Under Caribou’s analysis, we discovered that the price of Laura’s medication would amount to over $25,000 per year. This cost is above and beyond the costs they had already planned for in regards to Medicare costs, which mostly included only their premium and deductible prior to this analysis.

Snapshot of drug estimates of the lowest cost plan given Laura's prescription list.

Rob and Laura hadn’t anticipated such high drug costs, and they started to fear the costs they would incur once they lost their employer’s insurance plan. They had already planned their retirement date and made plans to relocate. And Laura can’t just go without this medication, either.

How Caribou Helped Rob and Laura Plan for Medicare Drug Prices

Once we uncovered the expense, Kim’s planning team quickly got to work evaluating the planning possibilities, while Caribou researched the options for the Medicare drug prices. Our team researched patent expiration dates, options for different drug delivery methods that would be covered by Medicare, and pricing for the drug from non-US pharmacies. 

Because of Caribou’s work, Kim was able to help this couple avoid what could have been a disastrous financial surprise for them. This planning was done months in advance of their Medicare transition date, so the couple had the appropriate time to digest the finding and plan accordingly with Kim. 

With some adjustments, Rob and Laura were able to prepare for the cost of Laura’s medication in a way that didn’t drastically alter their retirement outcome. They are still able to retire and can rest assured that they’re transitioning to Medicare knowing the true costs they’ll be subject to.

Kim is a fantastic financial advisor. But without Caribou’s assistance, she may not have had the foresight to research Rob and Laura’s medication costs. Fortunately, this type of scenario may not affect the majority of clients transitioning to Medicare, but it does happen. And if Kim and Caribou hadn’t discovered this problem, Rob and Laura may have faced a financial disaster.

How Caribou Can Help Your Clients Plan for Medicare Drug Prices

At Caribou, we know that helping clients transition and adjust to Medicare can be a full-time job in and of itself. (And the initial enrollment is only the first step!). That’s why we provide you with the resources and support you need to help your clients catch and prepare for unpleasant surprises like the one Rob and Laura faced. 

And the good news is, you don’t have to become a healthcare expert to provide this level of value to your clients. By partnering with Caribou, your clients have access to a holistic solution that will uncover these problems for you, providing immense value to your clients. To learn more about a partnership with Caribou, click here to schedule a conversation today.

Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual.