Picking the right Medicare Part D drug plan for your unique needs may not always be easy. However, by simply avoiding five of the most common and, very often, costly mistakes that people make when picking a Part D plan, you’ll have quite a head start on getting the cost-effective drug coverage you need.
1. Judging plans by the premium only.
Premiums are certainly important. However, it’s critical to know that plans with zero or very low premiums may not provide you with the lowest total out-of pocket costs. Be sure to consider other important cost factors, such as the deductible, coinsurance, and copayments.
2. Picking a plan with the lowest deductible.
Similar to picking a plan by premium only, people who simply choose plans that have the lowest deductible overspend on coverage by an average of $250 or more.
3. Paying more for extra coverage in the donut hole.
Only one in five Medicare beneficiaries with a Part D plan actually go into the Coverage Gap (also known as the donut hole). If you’re not one of these people, why pay extra for coverage you will not need?
4. Not checking a plan’s formulary.
A formulary is a listing of medications a plan covers and how they cover them. Each plan is unique. This means that while one plan may cover your medications, others may not — leaving you to foot the bill.
5. Ignoring a plan’s star ratings.
It’s important to find cost-effective coverage; not cheap coverage. You can benefit from the experience of others by referring to Medicare’s star ratings of plans. Whenever possible choose a plan with at least 3 stars (out of 5 total)
3 More Factors Impacting Part D Drug Costs
The four payment stages of a Part D drug plan have a big impact on what you pay. But, you also need to know about three additional factors that can affect drug plan pricing.
There are two ways that a drug plan charges for medications.
Copayment: This is a predetermined amount for a medication, such as $5 or $45. The amount a plan member pays for a prescription stays the same throughout the calendar year.
Coinsurance: This is a predetermined percentage of the cost of a medication, such as 30 percent. If the price of a medication goes up, the amount a member pays also increases.
A tier is a drug class for payment purposes. Part D drug plans usually have five tiers.
Tier 1 – preferred or common generic: Generally, these are the lowest cost medications. Most plans charge a copayment or set rate.
Tier 2 – non-preferred generic: These are the more expensive generic medications, usually with a copayment that’s more than a Tier 1.
Tier 3 – preferred or common brand-name: Most plans still charge a copayment but the out-of-pocket costs can start at $25 and go up from there.
Tier 4 – non-preferred brand name: Drug plans tend to charge a coinsurance for these medications so your costs can increase throughout the year.
Tier 5 – specialty tier: These drugs are very high cost or unique and may require special handling and/or close monitoring. Medicare limits the cost-sharing for these drugs to no more than 33%. Because each drug plan is in charge of its formulary, the same medication can be in different tiers from plan to plan. For example, a common topical ointment is a Tier 1, Tier 2, or Tier 3, depending on the plan, with co-payments ranging from $7 to $120.
Drug plans utilize two types of cost-sharing structures related to the pharmacies you use. Standard retail cost sharing:
This is the basic network pricing. In order for the plan to pay for
medications, you must use a pharmacy in network.
Preferred retail cost sharing:
This copayment or coinsurance is generally less because the plan has negotiated a lower pricing structure with the pharmacy. Not every plan offers this extra benefit.
When checking out plans, remember these tips.
– Investigate the cost sharing, copayments and coinsurance. How will that work with your drug regimen?
– Know how the plan classifies your medications. The higher tiers will likely cost more.
– Find out about pharmacies offering preferred cost-sharing and how much you can save.