Do you want to lower the amount you spend on prescription drugs? Then you need to know about “formularies” and “tiers.”
What is Medicare Part D?
If you are over 65 and retired you probably have drug coverage through Medicare’s prescription drug insurance program. It’s referred to as “Part D” and is offered solely through private insurance plans that contract with Medicare. Medicare will approve a contract only if the plan meets with certain minimum requirements.
Part D is a voluntary program and enrolling in it is up to you (unless you are low income and receive an “Extra Help” subsidy). You must take the initiative to enroll during certain times called enrollment periods.
If you have Original Medicare you can enroll in a stand-alone Part D plan. If you have coverage through a Medicare Health Plan (also called a “Part C” or “Advantage Plan”) your part D coverage may be bundled together with the plan's other benefits. In any event, Part D works the same way whether bundled within an Advantage Plan or purchased as a stand-alone.
What are Formularies and Tiers?
Each Medicare Prescription Drug Plan has its own list of covered drugs (called a "formulary"). The plans differ as to their formularies, as well as their premiums, costs, and pharmacy networks. Each plan can change each year in any of these areas, so you need to review your plan each year. There are dozens of Medicare Part D plans from which you can choose. In Pennsylvania in 2013 you can choose from over 30 stand-alone Part D plans.
Most Part D plans impose various forms of restrictions within their formularies. With some drugs you must get prior authorization; plans may require step therapy; and plans may impose quantity limits on your medications.
Many Medicare drug plans place drugs into different "tiers" within their formularies. Tiers are co-payment categories. Drugs in each tier have a different cost to you. Drugs in Tier 1 have the lowest co-payments. The plan will impose a higher co-payment (often $30-$50 in 2013) on Tier 2 drugs. Tier 3 drugs have the highest co-payments (often $60 to over $100 for a thirty day supply). A few drugs may be placed in a “specialty” tier and be very expensive.
Tips on Choosing a Medicare Drug Plan
When choosing a Part D plan you need to go beyond a simple determination of whether the prescription drugs you will be taking are included in the plan’s formulary. You also need to find out into which tier your drug has been placed by the plan and the amount of your co-pay responsibility. A drug in a lower tier will generally cost you much less than a drug in a higher tier. (Note, that 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 copayment.)
When you are choosing between Part D plans, make a list of all of the non-generic prescription medications you expect to be taking during the upcoming year. Then check the drugs against plan's tiers and co-payment requirements. Try to determine what will be the total cost to you over the year of a plan's premiums + deductibles + co-pays.
Use the Medicare Plan Finder
While this sounds complicated, the Medicare website can simplify your investigation and help you make a good decision. Visit the Medicare Plan finder to search for Medicare drug plans in your location. The link is: https://medicare.gov/find-a-plan/questions/home.aspx.
The Plan finder allows you to enter your list of prescription drugs, your preferred pharmacies and other information related to your prescriptions. After you complete the intake information, the Plan finder will provide you with a personalized list of plans organized in order of lowest estimated cost. This greatly simplifies the process of determining which plan may best meet your needs. The Plan finder deals with the complexities of formularies and tiers and co-payments for you.
The Plan finder will also provide you with a rating for each drug plan. Medicare uses information from satisfaction surveys and other sources to give overall performance star ratings to plans. Each plan is given a rating between 1 and 5 stars. A 5 star rating means “excellent” for quality and performance. The ratings are updated each fall and can change each year.
Be aware, however, that drug plans can (and do) change their formularies and tiers and co-pays and premiums each year. And your personal medication needs may change over time. This means that it’s best to review your plan choice annually. The Medicare Plan finder makes this task much less formidable.
Switching Drug Plans
If you decide to switch plans, Medicare has relatively liberal rules. You can switch to a different drug plan during any enrollment period. An open enrollment period takes place this year from October 15–December 7. In addition, you can switch to a 5-star rated drug plan during most of the year: from December 8 to November 30th. And a special enrollment period may be available to you if you move out of your existing plan’s service area or enter or leave a long term care facility.
Like much of health care in the United States, prescription drugs are expensive and your choices are complicated. Fortunately, Medicare is able to help. Using the Plan finder should take an hour or less and should provide you with the information you need. If you need more help, additional assistance is available to you through your State Health Insurance Assistance Program.
Your Guide to Medicare Prescription Drug Coverage, (Center for Medicare and Medicaid Services)
Part D / Prescription Drug Benefits, (Center for Medicare Advocacy)
MedPac Status Report to Congress on Part D (March 2012)
Links to Free Medicare Related Publications by the Federal Government
Your State Health Insurance Assistance Program can provide you with personal assistance.