People with Medicare

What are payment tiers for drugs?

How much a drug costs depends on what “tier” the drug is on. The plan puts each drug it covers on a tier or level. Then the plan decides how much you will pay if you use a drug on that tier. Sometimes, this is called your cost-share.

The cost can be either

A fixed amount that you would pay for each level, called a co-pay
or
A percent of the cost of the drug, called co-insurance

In general, your plan’s tiered co-pay and co-insurance amounts will only apply until you hit the coverage gap or “donut hole.” In 2009 you will hit the coverage gap when your co-pays or co-insurance plus the amount the plan has paid for your drugs equals $2,700. Then you will begin paying the full amount for your drugs. After your total drug costs hit $6,153.75, then you will pay either 5% of the costs, while your plan pays 95%, OR a co-pay of $2.40 for generic drugs and $6.00 for brand-name drugs on your plan’s list of covered drugs.

Co-pay

The plan sets a fixed price for all the drugs on each tier. Each plan can tell you how many tiers it has and what the co-pay amount is for each level. The typical Medicare formulary has three or four tiers, but some have more – check with your plan to see how many tiers it has. The drug list will say which tier each drug is on.

Example

Example

"Preferred drugs" are brand name or generic drugs that the plan believes treat a medical condition as well as other similar drugs. If your drug is "preferred," you will have a lower co-pay or price than if you take a similar, non-preferred drug. You can still use drugs in the "non-preferred" level, but you will have to pay more for them. (You can ask your plan to make an exception and let you pay less for the drug - see Asking for an exception.)

Co-insurance

Co-insurance means that you pay a percentage of your drug's cost. The plan decides what percentage you will pay. You would pay a different percentage for each tier.

The plans give their members a discounted price. You would pay a percentage of that discounted price.

Example

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What special rules or limits might I need to know to get my drugs?