Part D Explainer
The Basics of Medicare Prescription Drug Plans.
Medicare Part D Prescription Drug Plans are plans offered by private insurance companies that provide reduced-cost prescription drug coverage under the rules of Medicare. Every plan has different coverage rules and costs.
The monthly premium is the amount you pay to the insurance company every month. It’s kind of like paying a membership fee to a savings club. You pay the monthly premium and in return you get to payer lower prices on your prescriptions at the pharmacy.
The deductible is the amount you must pay out of pocket for your prescriptions at the pharmacy before your prescription drug plan starts covering part of your costs. The size of the deductible will vary by plan, but it will normally be the first $415 you spend on prescriptions in a year.
A copayment is a set dollar amount you pay for a prescription at the pharmacy. Your copayment will be an amount lower than the normal retail price. This is the deal you get because you pay your premium every month. While your monthly premium is always the same, your copayments will vary depending on type of prescription you take and the “coverage stage” you are in.
Coinsurance is like a copayment in that it’s an amount you pay for a prescription at the pharmacy. The difference is it is not a set dollar amount. Instead, it’s a set percentage of the retail price of the prescription you are buying. Just like a copayment, your coinsurance will be an amount you pay at the pharmacy that’s lower than the normal retail price.
TrustyChoice Shows You What All Of Your Costs Will Be For Your Drugs.
Every prescription drug plan has a list of drugs they cover called a “Formulary” or “Preferred-Drug List”. There are certain types of drugs that are excluded from the formularies of all prescription drug plans because of Medicare rules. The excluded drugs include things like weight loss drugs, drugs that serve cosmetic purposes, and prescription vitamins. There are other types of drugs that some plans cover and some do not.
Within each plans formulary, the drugs are organized into groups called “tiers”. The copayment or coinsurance you pay at the pharmacy depends on what tier your drug is in. Different plans have different tier structures, but here’s an example of a tier system:
Tier 1 — Generic Drugs
These are drugs with the same active ingredients as brand name drugs but are much less expensive. Your copay could be as low as $1 for this tier. With some plans you could get these drugs for free.
Tier 2 — Preferred Brand Name Drugs
These are brand name drugs that the plan “prefers.” Your copayment will be higher than it is for Generic Drug but with some plans it won’t be too unreasonable. But, again, the list of drugs and the copayment level with vary a lot by plan.
Tier 3 — Non-Preferred Brand Name Drugs
These are the drugs the plan would prefer you not to take. They’d prefer you take a Tier 1 or 2 drug, so the copayment for Tier 3 drugs will be much more expensive. You might pay something like a $50 copayment with this Tier, but sometimes more,
TrustyChoice Shows You the Plans That Cover Your Drugs and What Your Copayments Will Be.
The copayments and coinsurance you pay doesn’t just vary by Tier, it also varies by “coverage stage”. The coverage stage is determined by how much money you’ve spent on medications in the year. There are for stages:
You begin every year in the deductible stage. It lasts until you meet your plans deductible, which is most often $415. During this stage you will be covering all your own prescription costs. The insurance company will not yet be chipping in.
Initial Coverage Stage
You enter this stage once you’ve hit your deductible. Now the insurance company is going to start sharing your costs. This is when you start paying copayments instead of the full retail price. This stage lasts until the total amount that you and your insurance company have spent on your drugs for the year (after you’ve paid your deductible) adds up to $3,820. This is called your Initial Coverage Limit.
Coverage Gap Stage
After you’ve reached your Initial Coverage Limit, unless you have a plan with some gap coverage, your insurance company will be contributing much less, and you will be paying much more for you prescription drugs. You’ll stay until the Coverage Gap Stage until you’ve spent $5,000 dollars out-of-pocket on prescription drugs for the year.
Catastrophic Coverage Stage
Once you’ve spent $5,000 out-of-pocket you reach the Catastrophic Coverage Stage. Your insurance company will now be contributing much more, and you’ll be paying much less for your prescription drugs. You’ll only pay a small coinsurance or copayment on your drugs for the rest of the year.
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