Medicare Part D

Medicare Part D provides prescription drug coverage with copayments as little as $1, depending on the drug. Part D can be added to your Original or supplemental Medicare coverage to help pay astoundingly high out-of-pocket drug costs, and most Advantage plans already have Part D coverage included in their list of benefits.

Each time you receive a prescription with a Part D plan, you will have to pay a small amount known as either a copayment or coinsurance fee. The amount you pay depends solely on the type of drug you receive.

Prescriptions are categorized into 5 groups, or tiers. As a whole, this is referred to as a Medicare Part D formulary. Formularies will vary slightly depending on the plan and provider you choose, but these tiers are consistent across the board:

  • Tier 1: Preferred Generic
  • Tier 2: Non-Preferred Generic
  • Tier 3: Preferred Brand-Name
  • Tier 4: Non-Preferred Brand-Name
  • Tier 5: Specialty

Tiers 1 and 2

Tiers are listed by increasing price, meaning that tiers 1 and 2 are the least expensive drugs on the list. But what do these terms mean?

Preferred drugs will always be less expensive than their non-preferred counterpart. They’re “preferred” simply because they have been on the market for a while and have been proven effective, whereas non-preferred are relatively new and have not had a chance to decrease in price.

This is where the price difference between the two tiers comes from. You can expect to pay anywhere from:

  • $1-$3 for drugs in Tier 1
  • $7-$11 for drugs in Tier 2

What is the difference between generic and brand-name drugs? Think of the cereal aisle in the grocery store—Lucky Charms is the brand-named cereal, while Marshmallow Mateys is its generic equivalent.

And, like brand-name cereal, brand-name prescriptions are more expensive than their generic counterpart. Often, generic drugs have identical active ingredients as their brand-name equivalent—meaning that they will do their job just as well as their costly competitor.

Tiers 3 and 4

The same can be said for tiers 3 and 4, except now we have entered the more expensive brand-name category. You and your doctor(s) should always seek out prescriptions in tiers 1 and 2 first, but, if there is no generic equivalent, you will have to pay for the brand-name.

Like tiers 1 and 2, tier 3 will cost less than tier 4 because it is preferred. For both tiers, however, you can expect to pay more out-of-pocket than the first 2 tiers, with prices ranging anywhere from:

  • $38-$42 for tier 3 prescriptions
  • 45-50% of the total drug cost for tier 4 prescriptions

Tier 5

Tier 5 covers specialty prescriptions, and are the most expensive on the list. These drugs, however, fall somewhat into their own category, meaning that it may be hard to accurately compare them to the other 4 tiers.

With this tier, there are no brand-name, generic, preferred or non-preferred options. They are targeted towards very specific ailment, hence the name “specialty.”

For drugs in this tier, you will also pay 45-50% of the total cost, like tier 4. Unlike tier 4, however, these prescriptions cost more overall, thus raising the price of your percentage contribution.

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