Medicare’s Three Stages of Drug Coverage*

Each year, Medicare publishes a ‘standard benefit’ that insurance companies must meet to sell medications.  Insurance companies can do better than the standard, but they can’t do worse.

There are three stages of drug coverage:

  1.  The Deductible Stage
  2. The Initial Coverage Stage
  3. The Catastrophic Stage

1. Deductible: You pay the full price of the drug until you fulfill your deductible. The standard deductible is $615.  If you have a Medicare Advantage plan, you may never see the deductible or pay a lower amount.

2. Initial Coverage: Once you fulfill your deductible, your plan helps pay for medications.  You stay in this stage until you and the plan together reach $2,100.   

3.  Catastrophic: Once you reach $2,100, you’re in the Catastrophic Phase of drug coverage. Your cost is $0.

Does my premium count toward my out-of-pocket costs? 
No, it does not.  

What is Extra Help?
Extra Help, also called Low Income Subsidy, is a federal program to help pay for your medications.  If you receive Medicaid, you are automatically enrolled in Extra Help.   But you do not have to be on Medicaid to receive it.  Eligibility is based on income and resource thresholds set by the federal government. To find out more about Extra Help go to: https://www.ssa.gov/medicare/part-d-extra-help.

What’s a formulary?
A formulary is a list of covered prescription drugs for a particular health plan.  Each medication is assigned a tier or level.  A tier determines how much a medication costs.  Stand alone drug plans, and most Medicare Advantage, plans have five tiers.  Most generic medications are placed on Tiers 1 and 2.  Brand name medications and some generics are placed on Tiers 3 and 4.    Tier 5 is reserved for specialty medications.  Occasionally, a Medicare Advantage plan will have a sixth tier for medications that treat diabetes, cholesterol, and high blood pressure.  

*This website is not affiliated with or endorsed by any government agency.

For more information about this blog, call 725-227-6795, email ken@deserthealthandlife.com, or use the contact form on this website. I am a licensed insurance broker.

 

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