Understanding Medicare Drug Coverage: Choosing and Enrolling in a Plan
What Should I Consider When Choosing a Plan?
If you decide to enroll in a Medicare Prescription Drug plan, you must choose one Medicare drug plan from many available in your area to receive drug coverage throughout the year. Benefits and costs vary greatly among different plans.
When choosing a plan, you should consider the four Cs.
- Coverage—What drugs are covered by the plan?
- Cost—How much will I pay? How much are the premiums, deductible, coinsurance, and copays?
- Convenience—Does the plan have pharmacies in my community? Does the plan provide a 90-day supply through the mail? Will it provide my drugs if I am away from home in another state?
- Customer Service—How well does the plan respond to customers’ requests?
Here is more information about those features and how they may vary:
1. Coverage
Formulary—The list of drugs your plan covers. Plans must offer a range of drugs in most therapeutic categories (e.g., beta blockers, diuretics, and other classes) and they must cover nearly all drugs used in six classes: antidepressants, antipsychotics, anticonvulsants, antiretrovirals (for HIV/AIDS), immunosuppressants (for transplants), and anticancer drugs. Drug plans also can place limits on the drugs they cover in several ways:- Prior authorization or prior certification (PA)—An approval you must get from your plan before the plan will pay for a certain drug. This means asking your doctor to tell your plan why it is necessary for you to take this particular drug and request an “exception” to the rule.
- Step Therapy (ST)—A plan requirement that you first try a certain medication that has generally been proven effective in treating your condition before the plan will pay for a newer or higher priced drug.
Coverage gap or donut hole—The gap in drug coverage between your plan’s initial level of coverage and catastrophic coverage when you must pay the total cost of your prescription drugs out-of-pocket. Some plans pay for prescription drugs in the coverage gap. Of plans that do, some may cover both generic and brand name drugs, while others may cover only generics.
True Out-of-Pocket Costs (TrOOP)—In the coverage gap, the following count toward your True Out-of-Pocket costs to qualify for catastrophic coverage:
- your deductible
- your copays
- out-of-pocket payments for drugs covered on your plan’s formulary (including any exceptions you receive) and purchased from a pharmacy in your plan’s network
- payments for your drugs in the gap made by a family member, friend, a charitable group (unless affiliated with a union or employer), and some payments made by state pharmacy assistance programs
The following do not count toward your True Out-of-Pocket costs to qualify for catastrophic coverage:
- your premiums
- out-of-pocket costs for drugs not covered on your plan’s formulary or purchased from a pharmacy not in your plan’s network
- payments made by your plan or by an employer, union, federal agency, or other group insurer
- any drugs bought from Canadian or other foreign pharmacies' free or low-cost drugs received from a drug manufacturer’s patient assistance program, or samples from a physician
- free or low-cost drugs received from a drug manufacturer’s patient assistance program or samples from a physician
- out-of-pocket costs for drugs covered by your plan, but not covered under Medicare Part D
If you have other questions about what out-of-pocket spending does and doesn’t count in the coverage gap, contact your plan or Medicare at 1-800-MEDICARE.
2. Cost
Deductible—The amount you have to spend on drugs at the beginning of the calendar year before your coverage starts. Each year, Medicare sets an upper limit on the deductible. Plans can have lower deductibles, and some plans have none.
Premiums—A set dollar amount you pay, usually every month, to your drug plan. The amount will depend on which drug plan you choose. Like Medicare Part B, each person must pay a premium; there are no discounts for couples. There are several ways to pay your monthly premium. You can have it:
- deducted from your savings or checking account;
- charged to a credit or debit card;
- deducted from your Social Security benefit check; or
- billed usually each month.
Copayment—A fixed amount that you pay for each prescription, for example, $15 for your share.
Coinsurance—A percentage of a drug’s cost that you pay for each prescription, for example 25 percent for your share. Some plans use copayments, some use coinsurance, and some use a combination of both.
Tiers are levels that plans use to calculate copays or coinsurance. Here is how they work:
- Tier One: lowest copay, usually generic drugs
- Tier Two: medium copay, preferred brand name drugs
- Tier Three: higher copay, non-preferred brand name drugs
- Tier Four—highest copay or coinsurance, very expensive or specialty drugs
Note: Different plans may place the same drug on different tiers. Therefore, you may pay more for a drug with plan X than you do for the same drug with plan Y.
3. Convenience
Pharmacy Network—Your plan may limit you to using only pharmacies within its network (except in special circumstances specified by your plan). You will want to be sure the plan you choose works with pharmacies that are convenient to you—if you go outside the plan’s network, you’ll pay a lot more for your drugs. You may also want to check whether or not the plan offers drug refills by mail order.
“Preferred” Pharmacies—Your plan may also have a list of “preferred” pharmacies. Your cost sharing for covered drugs purchased at “preferred” pharmacies will be lower than drugs purchased at other network pharmacies.
National or Local Plan—If you expect to be in more than one place for lengthy periods (e.g., living in another state for a part of the year or traveling), you will want to choose a plan that has coverage everywhere you need it.
4. Customer Service
Compare Plans—Every year, Medicare will provide information on how well Medicare drug plans respond to customers’ requests. Plans are rated on how well they performed in five areas. This information is available online from Medicare (Medicare Drug Plan Finder tool at www.medicare.gov; go to “Compare Medicare Prescription Drug Plans”, then “Get Plan Performance Information”) or by calling Medicare at: 1-800-633-4227 (TTY 1-877-486-2048).
The categories are:
- Telephone Customer Service—the average time a plan member had to wait to speak to a representative.
- Complaints—the number of complaints about access to drugs, joining or leaving the plan, and drug costs.
- Appeals—how well the plan responds to appeals within the required timeframes and how often an independent review entity agreed with the plan’s decision.
- Information Sharing with Pharmacists—how well the plan shared important information with pharmacists about members’ enrollment.
- Drug Pricing—how well the plan provided price updates on the Medicare Prescription Drug Finder, and the percentage of drugs with price increases.
Each category is rated using:
- Three stars: Met most or all expectations
- Two stars Met some expectations
- One star: Did not meet most expectations
