How Medicare Drug Coverage Works
Original Medicare does not include any drug coverage. To ensure you’re covered for your prescriptions, you’ll have to join a Part D Drug Plan from a private insurance carrier.
The drug plans offered have a minimum standard which is set by the Center for Medicare and Medicaid Services (CMS). CMS states that in 2019 the coverages offered by a Part D Plan must be equal to or better than the following.
- Initial Deductible – Equal to or less than $415.
- Initial Coverage Limit – You pay a copayment or coinsurance up 25% of the retail cost of your prescriptions/drugs until your retail drug costs reach $3,820.
- Coverage Gap – Once you reach the coverage gap you will pay a maximum of 25% of the retail cost of your brand name drugs and a maximum pf 37% the retail cost of your generics until the amount you have paid out of your pocket for the year reaches $5,100.
- Catastrophic Phase – Once you have spent $5,100 out of your pocket for your drugs you will enter the catastrophic phase of your coverage. In this period, you are responsible for the greater amount of $3.40 or 5% the retail cost of your generics and the greater of $8.50 or 5% the retail cost of your brand drugs.
These coverage periods are for the calendar year and do not reset, even if you change plans before the next calendar year. Some plans do offer more coverage through the coverage gap (donut hole); check with a licensed insurance agent that specializes in Medicare to learn which plan is best for you.
How Do I Know What Drugs Are Covered Under the Plans
All Part D Plans have lists of drugs that they cover. These drug lists are called formularies and they can vary from plan to plan. Drugs that are generally covered must meet the following criteria.
- They must be approved by the FDA
- The must be sold and used in the USA
- They must be for an accepted medical condition
- They must only be available through a prescription
- They must not be drugs that will be covered under Parts A and B of Original Medicare.
Medicare Part D Drug Plans must cover a minimum of two drugs in each therapeutic class, and certain vaccines, such as the Shingles vaccine and diabetic supplies. It is a requirement from Medicare that they must cover all drugs in the six classes listed below.
- HIV/AIDS drugs
- Cancer Drugs
What Are Drug Tiers
The drugs are classified by different tiers in a prescription drug plan. The tier determines your different cost sharing (copay or coinsurance), amount you will be responsible to pay. Tier 1 drugs will be the cheapest and tier 5 will be the most expensive.
If you doctor prescribes you a medication that is a higher tier, you may be able to save money if he/she can recommend and prescribe a lower tier medication. You could also file for an exception to try and get the drug moved into a lower tier.
- Tier 1 – preferred/common generic drugs
- Tier 2 – non-preferred, more expensive generic drugs
- Tier 3 – preferred brand name drugs
- Tier 4 – non-preferred brand name drugs
- Tier 5 – specialty drugs
Other Terms and Rules You Need to Know
Nearly all Medicare Part D Plans use rules for the covered drugs, known as coverage rules. These rules place certain limits on coverage for certain drugs. These rules promote the proper use of medications that are medically necessary and help to keep the plan costs under control.
This rule requires you to try similar, lower cost prescriptions that have been proven effective for people with the same condition before you can “Step Up” to the higher cost prescription.
If your doctor thinks your condition requires the higher cost medications, or if you have already tried the lower cost alternative, then your doctor can contact you plan and ask for an exception to the step therapy rule.
The plans can limit the quantity, or number of drugs/pills they will cover for you during an allotted amount of time. They can do this for both safety and cost reasons.
For example, they can limit your pain medication to a 30-day supply instead of a 90-day supply. If you need more than the limit, your doctor will have to contact your plan to provide more information about the medical condition.
If the plan has this as a condition for a medication you are taking you will be required to have your doctor contact the plan before you can fill your prescription.
He/she will have to show the medically necessary reason why you must take that specific prescription for it to be covered under the plan.
What If My Drug Is Not Covered Under My Plan
If your drug is not covered under the plan formulary list of covered prescription drugs, you can either ask your doctor to switch you to a different medication that is covered or ask for an exception.
- Tier Exception – A tier exception is when you get a higher tier drug at a lower tier cost. This tier exception could be granted because the lower cost drug, will not be as effective in treating your condition.
- Formulary Exception – A formulary exception is when your doctor believes a prescription is necessary but is not on the plan formulary. Or if your doctor believes that a rule should be waived, such as step therapy or quantity limit.
To compare drug plans in your area and see what medications those plans cover, check out the Part D plan finder tool.