In my previous post, Phase I: The Prescription Drug Deductible, I covered how Medicare Part D drug plan benefits reset each January 1. The post also described how a plan deductible amount may apply to any or only a specified group of medications.
For many, depending on whether your January refills were affected by the deductible, February refills mean entering Phase 2: the Medicare Part D Initial Coverage Period.
Phase 2: 25% Co-Insurance?
Prior to passage of the Medicare Modernization Act (MMA) of 2003, which created Medicare’s Part D drug plans, many seniors could not afford drugs and either skimped on or went without prescription medications. The MMA establishes a standard benefit which may include a monthly premium, standard deductible and co-insurance at 25% of drug costs. (See the graphic below.) Compared to paying 100% and having no drug coverage prior to MMA, many seniors viewed the 25% co-insurance as much better than before.
However, only a small fraction of Part D plans stick to the defined standard benefit. Plans vary widely in their formularies and cost-sharing requirements. Most eliminate the deductible and use tiered drug co-payments rather than the 25% coinsurance.
“Dan, is that why some of my medication costs are next to nothing and others are so expensive?”
Tiered drug co-payments
Each Medicare drug plan has its own list of covered drugs called a formulary. Rather than impose the standard 25% co-insurance on all medications, many plans place drugs into different “tiers” so that some medications cost you much less than the standard 25% and others much more.
Drugs in each tier have a different cost share to you. A drug in a lower tier will generally cost you less than a drug in a higher tier. The following approximate costs are for a 30 day supply.
- Tier 1: Preferred Generic. (Co-pay may range from $0 to $5)
- Tier 2: Generic. (Co-pay may range from $0 to $15)
- Tier 3: Preferred Brand. (Co-pay may range from $30 to $60)
- Tier 4: Non-Preferred Brand. (Co-pay may range from $75 to $125)
- Tier 5: Specialty Tier. (Co-insurance is usually the standard 25% or more)
Frequently Asked Questions:
Q: If a drug, including form and dosage (ex: 50 mg tablet) is listed as Tier 1 in my current drug plan formulary, will it be listed Tier 1 in others, too?
A: Likely, but no guarantee. For example, this week I noticed rosuvastatin listed as Tier 1 on one plan formulary, Tier 3 on another and not included at all on a third formulary. I know, it’s maddening.
Q: My plan documentation says there is a deductible but when I refilled my Tier 1 medication, I paid only a few dollars. Why?
A: Many plans waive the deductible for Tier 1 and Tier 2 medications and apply it to Tiers 3, 4 and 5 only. If that is the case with your plan and your medications are all Tier 1 or 2, that deductible wouldn’t apply to your prescriptions.
Q: My doctor prescribed a medication before we realized it was listed as Tier 3 on my plan formulary, what can I do?
A: You can always ask your provider to check for a generic version of the drug that is listed on your plan formulary and equally safe and effective. By the way, I’ve seen instances where a drug manufacturer took two generic compounds; merged them into a new medication, applied for patent protection, assigned it a new brand name and received brand name pricing. Ask your doc if taking the two generic pills instead of the new and more costly brand name pill will be just as safe and effective.
Q: Ok, my plan documentation shows the different co-pays by tier levels but than also mentions a difference between preferred and standard pharmacies. What’s that about?
A: Many plans have negotiated preferred pricing with specific retail pharmacies. While your Part D card is accepted as most every pharmacy, you’ll experience lower retail cost (we’ll cover that topic in the upcoming post about Phase III) and lower co-pay at the plan’s Preferred Pharmacy. (For example, United Healthcare has a preferred pharmacy relationship with Walgreens and Hannaford Supermarkets, Aetna with CVS, Humana and WalMart; ask me for the current list of of your plan’s preferred pharmacies.)
Q: I live in New York State and belong to EPIC. My co-pays are different from what is shown above, why?
A: A handful of states offer a State Pharmaceutical Assistance Program like New York’s EPIC. These SPAP programs include conditions (perhaps a fee or its own deductible) after which your co-pay levels are capped. In New York, for example, qualified EPIC members pay no greater than $20 for medications included in their plan’s formulary. (Learn more about EPIC here.) (Listen to my interview with Beth about her amazing EPIC experience.)
Q: My plan documentation says there is a deductible but I don’t pay that and my Tier 3 medication copay is lower than what is shown above. Why?
A: For the plan year 2018 if your income is below $18,090 per year for a single person (or $24,360 for a married couple living together) you may qualify for Social Security Extra Help in which case you don’t pay the plan deductible and co-pays are subsidized, too.
(Coming Next) Phase III: The Coverage Gap aka The Donut Hole