Each Medicare Prescription Drug Plan is provided by a private company subsidized by the government and it has its own list of covered drugs (called a formulary). Many Medicare drug plans place drugs into different “tiers” on their formularies. Drugs in each tier have a different cost. Each drug can be placed into a different tier by each company. So while company A has a drug listed as tier 1, company B can list that same drug as a tier 4 if they so desired.
A drug in a lower tier will generally cost you less than a drug in a higher tier. In some cases, if your drug is on a higher tier and your prescriber thinks you need that drug instead of a similar drug on a lower tier, you or your prescriber can ask your plan for an exception to get a lower co-payment.
A Medicare drug plan can make some changes to its formulary during the year within guidelines set by Medicare. If the change involves a drug you’re currently taking, your plan must do one of these:
Provide written notice to you at least 60 days prior to the date the change becomes effective.
At the time you request a refill, provide written notice of the change and a 60-day supply of the drug under the same plan rules as before the change.
***In most cases, your prescribers need to be enrolled in Medicare or have an “opt-out” request on file with Medicare for your prescriptions to be covered by your Medicare drug plan. If your prescriber isn’t enrolled or has “opted-out,” you’ll still be able to get a 3-month provisional fill of your prescription. This will give your prescriber time to enroll, or you time to find a new prescriber who’s enrolled. Contact your plan or your prescribers for more information.
- Remember that each Part D Plan can change their prices and the drugs they cover each year. So make sure you take advantage of the Annual Election Period (AEP) from October 15th through Dec. 7th. During this time everyone on Medicare can review what Part D coverage will be best for them the following year. Even if you are happy with your current plan, it is wise to make sure they will remain the best option for you.
Coverage Gap – Donut Hole
Costs in the coverage gap
Most Medicare Prescription Drug Plans have a coverage gap (also called the “donut hole”). This means there’s a temporary limit on what the drug plan will cover for drugs. You can also define this as a Mid-Term Deductible.
Not everyone will enter the coverage gap. The coverage gap begins after you and your drug plan have spent $3,700 for covered drugs. In 2017, once you and your plan have spent $3,700 on covered drugs, you’re in the coverage gap and this amount will likely change in 2018. Also, people with Medicare who get Extra Help paying Part D costs won’t enter the coverage gap.
Brand-name prescription drugs
Once you reach the coverage gap in 2016, you’ll pay 40% of the plan’s cost for covered brand-name prescription drugs. You get these savings if you buy your prescriptions at a pharmacy or order them through the mail. The discount will come off of the price that your plans has set with the pharmacy for that specific drug.
Although you’ll only pay 40% of the price for the brand-name drug in 2016, 90% of the price—what you pay plus the 50% manufacturer discount payment—will count as out-of-pocket costs which will help you get out of the coverage gap. What the drug plan pays toward the drug cost (5% of the price) and what the drug plan pays toward the dispensing fee (55% of the fee) aren’t counted toward your out-of-pocket spending.
Mrs. Anderson reaches the coverage gap in her Medicare drug plan. She goes to her pharmacy to fill a prescription for a covered brand-name drug. The price for the drug is $60, and there’s a $2 dispensing fee that gets added to the cost. Mrs. Anderson pays 45% of the plan’s cost for the drug and dispensing fee ($62 x .45 = $27.90).
The amount Mrs. Anderson pays ($27.90) plus the manufacturer discount payment ($30.00) count as out-of-pocket spending. So, $57.90 counts as out-of-pocket spending and helps Mrs. Anderson get out of the coverage gap. The remaining $4.10, which is 5% of the drug cost and 55% of the dispensing fee paid by the drug plan, doesn’t count toward Mrs. Anderson’s out-of-pocket spending.
If you have a Medicare drug plan that already includes coverage in the gap, you may get a discount after your plan’s coverage has been applied to the price of the drug. The discount for brand-name drugs will apply to the remaining amount that you owe.
In 2016, Medicare will pay 42% of the price for generic drugs during the coverage gap. You’ll pay the remaining 58% of the price. What you pay for generic drugs during the coverage gap will decrease each year until it reaches 25% in 2020. The coverage for generic drugs works differently from the discount for brand-name drugs. For generic drugs, only the amount you pay will count toward getting you out of the coverage gap.
Mr. Evans reaches the coverage gap in his Medicare drug plan. He goes to his pharmacy to fill a prescription for a covered generic drug. The price for the drug is $20, and there’s a $2 dispensing fee that gets added to the cost. Mr. Evans will pay 58% of the plan’s cost for the drug and dispensing fee ($22 x .58 = $12.76). The $12.76 amount he pays will be counted as out-of-pocket spending to help him get out of the coverage gap.
If you have a Medicare drug plan that already includes coverage in the gap, you may get a discount after your plan’s coverage has been applied to the price of the drug.
Items that count towards the coverage gap
Your yearly deductible, coinsurance, and copayments
The discount you get on brand-name drugs in the coverage gap
What you pay in the coverage gap
Items that don’t count towards the coverage gap
The drug plan premium
Pharmacy dispensing fee
What you pay for drugs that aren’t covered
If you think you should get a discount
If you think you’ve reached the coverage gap and you don’t get a discount when you pay for your brand-name prescription, review your next “Explanation of Benefits” (EOB). If the discount doesn’t appear on the EOB, contact your drug plan to make sure that your prescription records are correct and up-to-date. Get your plan’s contact information from a Personalized Search (under General Search), or search by plan name. If your drug plan doesn’t agree that you’re owed a discount, you can file an appeal.