Medicare drug coverage.
Phase 2, the initial coverage period: This stage begins when you’ve met any plan deductible. Otherwise, it begins on January 1 or whenever you start using Medicare drug coverage. You then pay the co-payments required by your plan for each prescription, and the plan pays the rest. This period ends when the total cost of your drugs — what you’ve paid plus what your plan has paid — reaches a certain dollar limit set in law ($4,020 in 2020).
Phase 3, the coverage gap: This gap — often called the doughnut hole — begins when you hit the limit of initial coverage and ends if and when the amount you’ve spent out-of-pocket on drugs from the beginning of the year hits another dollar limit set in law ($6,350 in 2020).Until 2011, you would’ve had to pay 100 percent of the cost of your drugs in the gap. Now you pay a lot less because under the Affordable Care Act, the gap is gradually shrinking. In 2020, your plan will cover at least 5 percent of the cost of covered brand-name drugs, plus you’ll get a discount of 70 percent on brand-name drugs from the manufacturer, so the amount you will pay is 25 percent of the cost. Also, as of 2020, Medicare will cover 75 percent of the price for generic drugs for those in the coverage gap, so in 2020, you will pay only 25 percent for both generic and brand-name drugs. These discounts come partly from the drug manufacturers and partly from the government.What’s more, the 50 percent that the drug manufacturers contribute to the discounts on brand-name drugs counts toward the dollar out-of-pocket limit that gets you out of the gap; that is, you get credit for having paid full price even though you’re receiving the discount. But for any discounts funded by the government, such as those for all generic drugs and anything above 50 percent for brands, only what you pay counts toward getting out of the gap. (I explain the gap in more detail in Chapter 14.)
Phase 4, catastrophic coverage: If your drug costs are high enough to take you through the gap, coverage kicks in again. At this point, your share of the costs drops sharply. You pay no more than 5 percent of the price of each prescription. Catastrophic coverage ends on December 31. The next day, January 1, you return to Phase 1 (or Phase 2 if your plan has no deductible), and the whole cycle starts over again.
Figure 2-1 is a quick way of looking at the same cycle of coverage.
© John Wiley & Sons, Inc.
FIGURE 2-1: Phases of Part D drug coverage and dollar limits.
Figure 2-2 shows this information in a different way. Here, you can see examples of brand-name drugs costing (for the sake of simplicity) $100, $200, or $300 per one-month prescription — and what you’d pay for them in each phase of coverage. These examples assume co-pays during the initial coverage period of $45 for each prescription, although co-pays vary widely among Part D plans.
© John Wiley & Sons, Inc.
FIGURE 2-2: Examples of costs through four phases of coverage.
Finding out about formularies
You usually have to pay the whole tab for drugs that aren’t covered. Your plan pays its share of the cost during the initial and catastrophic coverage phases (Phases 2 and 4). But for any drug the plan doesn’t cover, you pay full price in all phases of coverage unless you win an exception from the plan. (I explain coverage exceptions in Chapter 14.) The difference in your out-of-pocket expenses between a covered and uncovered drug can be hundreds of dollars a month.
You don’t get doughnut-hole credit for uncovered drugs. If you fall into the doughnut hole (Phase 3), the cost of any drugs not covered by your plan doesn’t count toward the out-of-pocket limit that gets you out of the gap and triggers low-cost catastrophic coverage.
You’re more likely to properly fill and take your medicines. You need the meds you’re prescribed for the sake of your health. If you get coverage for them and don’t have to pay full price, you’re much more likely to fill all your prescriptions and not skip doses.
No Part D plan covers all prescription drugs, and the number covered varies greatly among plans. In 2019, 63 percent of drugs were covered by Medicare Part D plans, according to an analysis by the health research group Avalere Health. So the goal is to choose a plan that covers all, or at least most, of the specific drugs you take. I describe a strategy for doing so in Chapter 10.
In the following sections, I note the drugs that Part D has to cover and the ones that it doesn’t pay for.
Laying out the drugs Part D plans must cover
Although Medicare law doesn’t require Part D plans to cover every drug, it does require each plan to cover at least two drugs in each class of medications. A class means all the similar drugs that are used to treat the same medical condition. Many plans cover more than two in each class. But every plan must cover “all or substantially all” drugs in each of the following six classes:
Anticancer drugs (used to halt or slow the growth of cancers)
Anticonvulsants (used mainly to prevent epileptic seizures)
Antidepressants (used to counteract depression and anxiety disorders)
Antipsychotics (used to treat mental illnesses such as schizophrenia, mania, bipolar disorder, and other delusional conditions)
HIV/AIDS drugs (used to block or slow HIV infection and treat symptoms and side effects)
Immunosuppressants (used to prevent rejection of transplanted organs and tissues and treat immune system disorders and some inflammatory diseases)
Medicare requires every Part D plan to cover pretty much all drugs in these categories because of the clinical problems that can occur when patients abruptly stop taking such medications or switch to others.
Recognizing the drugs Medicare doesn’t pay for
Medicines sold over the counter (not
