Navigating the ins and outs of Medicare can be a challenge if you’re not familiar with certain terms.
Medicare Part D, which helps cover prescription drug costs, has its own terminology. With Medicare Annual Enrollment running from Oct. 15 to Dec. 7, now is a good time for a refresher on key words to inform your coverage decisions for 2023.
A Medicare plan’s Part D 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.
Higher tiers generally include brand-name drugs and specialty medications and tend to have higher copays or coinsurance. Talk to your provider to see if the brand-name prescription you take can be replaced with a generic version.
Deductible, copay and coinsurance
A deductible is the amount you pay out of pocket in a given plan year for eligible prescription drugs before your plan’s coverage kicks in. The deductible can vary from plan to plan, with many Medicare Advantage Prescription Drug (MAPD) Plans having no deductible or only on higher price drugs.
Some plans charge a copay, which is a flat fee for each time you fill a prescription. For example, a plan may require you to pay $2 when you fill a prescription for a generic drug and a higher amount for a brand-name drug.
With coinsurance, you pay a set percentage of the cost of the drug instead of the flat fee associated with a copay. Coinsurance is most common on highest cost drugs. Deductible, copay and coinsurance may also be known as a cost share.
Medicare plans with Part D coverage 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 Medicare plan with Part D coverage, review the formulary to make sure your drugs are covered.
Also keep in mind that plan formularies can change from year to year, so don’t assume that the prescription drugs covered under your current plan will be covered in 2023.
Preferred pharmacy network
A Medicare plan with Part D coverage 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. Some plans also have mail-order pharmacy benefits, and you may be able to get prescriptions delivered to your home for a lower cost share than purchasing from a retail location.
The donut hole
The majority of Medicare plans with Part D coverage have a coverage gap known as a “donut hole.” For example, in 2023, you enter this donut hole once your out-of-pocket costs (including deductibles, copays and coinsurance) for prescription drugs reach $4,660. Once you’re in the donut hole, you will pay 25% of the cost of your drugs.
In 2023, once your out-of-pocket costs reach $7,400, you exit the donut hole and pay a smaller coinsurance. Your plan tracks your out-of-pocket spending and this information should be accessible on your plan website and monthly statements.
If you meet certain income and resource requirements, you may be eligible for Extra Help, which helps qualified beneficiaries pay some or all Medicare Part D premiums, deductibles, copayments and coinsurance.
Now is a great time to start thinking about your health and budget needs for the upcoming year. Whether you’ll be enrolling in Medicare for the first time, looking to change your coverage during Medicare’s Annual Enrollment Period, or helping a loved one make decisions, visit UHCMedicareHealthPlans.com to access resources to help you prepare and make confident choices.