How to Compare Medicare Drug Plans
There are many private drug plans. Each drug plan company can offer more than one plan. The benefits and costs vary between companies and drug plans. That’s why it’s important to compare them before making a decision.
Look at several different plans before deciding which one best meets your prescription drug needs. It is easier to compare plans if you make a list of all the drugs you are taking, their dosages (e.g., 10 mg), and how often you take them.
You can learn about drug plans in your area (the prices they charge, which pharmacies you can use, and the drugs they cover) by using Medicare’s Web-based plan finder tool. You can also call one of Medicare’s specially trained telephone operators at 1-800-633-4227 (TTY 1-877-486-2048) for the same information.
Helpful Tip:
Use the quick enrollment checklist to help you organize the information you need to compare drug plans.
When choosing a plan, consider the four Cs.
- Cost—How much do my drugs costs? How much are the plan’s premiums, deductible, coinsurance, and copays?
- Coverage—What drugs are covered by the plan?
- Convenience—Are there plan pharmacies in my community? Does the plan provide a 90-day supply through the mail?
- Customer Service—How easy is it to reach a plan representative when you have a question?
Let’s take each “C” in turn and talk about the features common to most drug plans and how they may vary.
Cost
First, let’s describe the words that are used.
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. In 2007, the limit is $265 annually. Plans can have lower deductibles, and some plans have no deductibles.
Premiums—A set dollar amount you pay usually each month to your drug plan sponsor. The amount will depend on which drug plan sponsor and what drug plan you choose. Like Medicare Part B, each person must pay a premium; there are no discounts for couples.
Copayment—A fixed amount that you pay for each prescription, for example $15 for your share of each prescription. Frequently, shortened to “copays.”
Coinsurance—A percentage of a drug’s cost that you pay for each prescription, for example 25% of the total cost of each prescription.
Some plans use copays, some use coinsurance, and some use a combination of both.
Plans usually have three or four copay or coinsurance levels called tiers. Here is how they work:
| Tier One generic drugs lowest cost copay |
| Tier Two brand name drugs medium cost copay |
| Tier Three non-preferred brand name drugs higher cost copay |
| Tier Four very expensive or specialty drugs highest cost copay or coinsurance |
Different plans may place the same drug on different tiers. So, you may pay more for a drug with plan X than you do for the same drug with plan Y.
Helpful Tip:
Which drugs you take and how much they cost under different plans is more important in calculating your out-of-pocket costs over the year than looking only at premiums and deductibles.
Coverage
Formulary—The list of drugs your plan covers and the drugs’ tiers. Plans must offer at least two drugs in each class of drugs (for example, beta blockers or diuretics) and they must cover nearly all drugs used in these six classes: antidepressants, antipsychotics, anticonvulsants, antiretrovirals (for HIV/AIDS), immunosuppressants (for transplants), and anticancer drugs.
As part of the formulary, drug plan companies can place limits on drugs they cover in several ways:
- Prior authorization or prior certification—An approval you must get from your plan before the plan will pay for a drug. This means that your doctor has to tell your plan why it is necessary for you to take a drug before the plan will pay for it.
- Step Therapy—A plan requirement that you first try a certain medication that has been proven effective in treating your condition before the plan will pay for a newer or higher price drug.
- Quantity Limits--The number of pills you can get over a certain period of time. This is normally used as a safety measure to be sure people aren’t taking more than the commonly prescribed dose for the treatment of an illness or condition.
Coverage gap or donut hole—The gap in drug coverage when your plan’s initial level of coverage ends and catastrophic coverage starts where 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.
Helpful Tip:
Knowing the total cost of the drugs you take—that is, the amount paid by both you and your drug plan—will help you choose the level of coverage you need.
Example 1: If your drugs cost about $300 per month, you’ll enter the coverage gap part way through the year. You may want to consider getting a plan that pays for drugs in the coverage gap.
Example 2: If your drugs cost about $100 per month, you may not want coverage in the gap since you don’t expect your drug costs will hit the $2,400 limit on initial coverage.
The monthly Explanation of Benefits statement sent by your drug plan will show how much you and your drug plan have spent for the year and how close you are to reaching your plan’s coverage gap.
When a drug is in a higher tier (not “preferred” by your plan), it usually means you pay more out-of-pocket. Ask your doctor whether an alternative drug—one that is on your plan’s preferred list—could be right for you. This will save you money and may keep you out of the coverage gap.
Getting Out of the Coverage Gap
In the coverage gap, the following count toward your out-of-pocket expenses to qualify for catastrophic coverage:
- your deductible
- your copays
- payments you make out-of-pocket for drugs covered on Medicare’s approved 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
In the coverage gap, the following do not count toward your out-of-pocket expenses to qualify for catastrophic coverage:
- your premiums
- payments you make out-of-pocket for drugs not covered on Medicare’s approved 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 Canada or other foreign countries
- free or low-cost drugs received from a drug manufacturer's patient assistance program or as free samples from a physician
If you have questions about what out-of-pocket spending does and doesn’t count in the coverage gap, contact your plan.
Convenience
Pharmacy Network—Pharmacies that contract with your drug plan sponsor. 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. You may also want to check whether or not the plan offers mail order drug refills.
National or Local Plan—If you live in more than one place, like another state, for a part of the year or travel for long periods of time, you will want to choose a plan that has coverage everywhere you need it.
Customer Service
Every year, Medicare will provide information on how well Medicare drug plans respond to customers’ requests. This information is available from Medicare via its Web-based plan finder tool. You can also call Medicare at 1-800-633-4227 (TTY 1-877-486-2048).
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Additional Resources
Medicare
Medicare has created a plan finder tool to help you find a drug plan that meets your personal needs. Medicare representatives are also available to help on the telephone. Call Medicare at 1-800-633-4227 (TTY 1-877-486-2048)
State Health Insurance Assistance Programs
State Health Insurance Assistance Programs (SHIPs) have counselors that help you if you need individual assistance with Medicare issues. You can also call Medicare at 1-800-633-4227 to find a SHIP counselor in your state.
