Navigating the ins and outs of Medicare can be an intimidating experience if you’re not familiar with certain terms.
Medicare Part D, which helps cover prescription drugs, has its own terminology. Medicare Open Enrollment runs through Dec. 7, so now is a good time for a refresher on key words to inform your coverage decisions for 2018.
Deductible, Copay and Coinsurance
A deductible is the amount you pay out of pocket in a given year for eligible prescription drugs before your plan’s coverage kicks in. The deductible can vary from plan to plan.
Some plans charge a copay, a flat fee, each time you fill a prescription. For example, a plan may require you to pay $2 when you fill a prescription for generic drugs and a higher amount for brand-name drugs.
With coinsurance, you pay a set percentage of the cost of the drug instead of the flat fee associated with a copay.
Part D plans are offered by private insurance companies, and each plan has what’s known as a formulary, a list of the prescription drugs covered under the plan.
“When considering a Part D plan, be sure to review the formulary to make sure your medications are covered,” said Kent Monical, senior vice president for Part D at UnitedHealthcare Medicare & Retirement.
And keep in mind that plans can change from year to year, so don’t assume that the prescription drugs covered under your current plan will carry over in 2018.
A Medicare Part D plan’s formulary is made up of tiers, depending on the cost of the medications. The lower tiers generally include preferred generic drugs, and many plans cover these medicines with low or no copay or coinsurance.
“Determine if the plan is a good fit for your budget, and pay attention to more than just the monthly premium,” Monical said. “You should also understand other out-of-pocket costs, including the deductible, copays and coinsurance.”
Higher tiers generally include brand-name drugs and specialty medications and tend to have higher copays or coinsurance. So, talk to your doctor to see if the brand-name prescription you take can be replaced with a generic version.
Preferred Pharmacy Network
A Part D plan may designate a preferred network of pharmacies, and if you use these pharmacies, you can save money on prescriptions.
“Make sure the plan offers access to pharmacies that are convenient for you,” Monical said. “Some plans also have mail-order pharmacy benefits, and you may be able to get prescriptions delivered to your home for a lower cost than purchasing from a retail location.”
The Donut Hole
The majority of Part D plans have a coverage gap known as a “donut hole.” For example, in 2018, you enter this donut hole once your out-of-pocket costs (including deductibles, copays and coinsurance) for prescription drugs reach $3,750. While you’re in the donut hole, you pay a higher percentage (35 percent for brand-name drugs and 44 percent for generic drugs in 2018) of the cost of the drugs.
Once your out-of-pocket costs reach $5,000, you exit the donut hole and pay a smaller copay. But, the days of the donut hole are numbered. Under a provision of the 2010 Affordable Care Act, the coverage gap has been steadily shrinking and is set to be eliminated entirely by 2020.
Plans are insured through UnitedHealthcare Insurance Company or one of its affiliated companies. For Medicare Advantage and Prescription Drug Plans: A Medicare Advantage organization with a Medicare contract and a Medicare-approved Part D sponsor. Enrollment in these plans depends on the plan’s contract renewal with Medicare.