Prescription Drug Plans start with a drug formulary. This is a list of all the prescription drugs covered under their plan. They are divided and sorted into different categories called Tiers. Plans typically have 4,5 or 6 tiers. For example, a plan may have Tier 1- preferred generic, Tier 2 - non-preferred generic, Tier 3 - preferred Name Brand, Tier 4 - non-preferred Name Brand, Tier 5 - Specialty Drugs. Each tier has a different copay or coinsurance associated with it.
Plans may have an annual deductible. This is the amount of money you need to spend out of pocket before the plan starts to pay. This amount is set by CMS each year ($590- 2025). Many plans waive the deductible for the generic tiers. Some also have a lower deductible, or eliminate the deductible for the Name Brand tiers. This may result in a higher premium for that plan, if it is a stand alone drug plan. Sometimes it may make sense to pay the higher premium for your drug plan to reduce the deductible, depending on your particular prescription drug needs. Some of the Medicare Advantage Plans include the drug plan and the cost is already calculated in the premium of the plan, even when the premium is $0.
After you have met the annual deductible (when it applies) you enter the Initial Coverage Stage. You will pay 25% until a maximum of $2,000 out-of-pocket costs (includes deductible, copayments, any coinsurance, and any pharmaceutical discounts). This maximum has been greatly reduced from 2024. Then you directly enter the Catastrophic Coverage where your copays all go down to $0 for all covered drugs. No more Donut Hole! Yay!
In addition to formularies and tier levels, Part D plans use a variety of prescription drug benefit management tools.
Step Therapy - You may be asked to try one or more similar lower costing drugs before other costlier drugs are covered. If you are allergic or the lower costing drug doesn't work for you, your doctor can appeal this for you.
Prior Authorization - Requires the doctor to contact the plan to request authorization before the plan will cover the prescription drug. The doctor must show the plan that the drug is medically necessary for it to be covered.
Quantity Limits - For safety reasons and cost reasons, especially for things like pain killers, Part D plans may limit the amount of a prescription drug over a certain period of time. Plans may also impose certain limitations on the prescribers or pharmacies a beneficiary can use. This helps to manage utilization for beneficiaries who are at risk of misusing or abusing certain drugs such as opioids.
Part D coverage is generally provided through contracted pharmacies. Plans may designate pharmacies as "preferred", with lower levels of cost sharing versus "standard", where cost sharing levels might be higher. Be sure to know which pharmacy has the lowest costs for you. Where you purchase your prescription drugs can make a difference in your copay. Many plans also have a mail order option. Sometimes that can save you money as well and you can have your prescriptions conveniently arrive at your house. Instead of calling in your prescription to your local pharmacy, the doctor contacts the mail order pharmacy.
A Medicare Broker can research and compare plans for you so you know which plan best covers your prescription drugs.
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