How does my Medicare Part D drug plan insurer make a profit with a $0/month premium?

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… and a $0 co-pay on 6 of the 7 drugs I take (i.e., they’re 100% FREE). The 7th drug has a $15 co-pay for a 90-day supply (i.e. $60/year. ) It would cost me $260 to buy a year’s supply of that last one with a GoodRx coupon and a cash purchase. It seems impossible.

It’s all about the “skim” and scam.

{{ In 2025, the national average monthly direct subsidy from the federal government to Medicare Part D plan insurers is projected to be $142.67 per member per month (PMPM) (i.e. $1,712 per year!)

My $0/month plan is sold by a captive subsidiary of Centene Corporation (#25 on the Fortune 500) They operate nationwide, though in some zip codes my $0/month “ValueScript Plan” may have a premium of $1 to $5/month.

Roughly 50% of Medicare beneficiaries take no medications, or one or two generic drugs that are as cheap as aspirin. If you can attract a lot of these folks to your health plan, while collecting the average $1,700 per year Gov’'t subsidy, it’s a frigging bonanza.

Now albaby will point out that I might need to take an expensive name-brand drug that costs $300,000 per year. What happens then? No doubt my el-cheapo drug plan doesn’t have the good stuff in it’s formulary.

That’s actually a possibility for me. That drug with the $15 copay could well be replaced at some point with a medication costing hundreds of thousands of dollars per year. At that point my doctor will request an exception to the formulary and provide documentation for medical need. It will then be covered and subject to the $2,000 maximum annual out of pocket cost for Part D drug plans (i.e., the most I’ll pay for all my drugs in 2025 will be $2,000.)

But if you don’t understand the arithmetic of how this works, you might be hoodwinked into buying a Drug Plan with a much higher premium thinking that it will provide you with (5* star) coverage.

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You get what you pay for.

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No.

You get what the insurance company pays out on claims after a significant effort to cheat you out of the coverage you paid for.

If you’re not matching premiums paid to your risk, and ability to handle a high deductible (or retaining the entire risk and going bare), you’re tossing money to the wind.

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If I am truly lucky I will die in bed at a very old age. I will have paid in for decades and not used much of the insurance, or by that time Medicare.

I am good with that because it will take care of others. Including those employed by the transactions.