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Medicare Part D Deductible and Prescription Drug Tiers

Medicare Part D Deductible and Prescription Drug Tiers

Understanding the Part D deductible is like trying to figure out which way the wind’s blowing in a tornado. “Why do they have to make it so complicated?” — I don’t have the answer, but I do have a knack for making things more understandable. We’re going to try to clear it up for you.

Picture this — you’re looking at a Medicare drug plan, and it’s got a big deductible staring right back at you. Think of it like the entrance fee to the prescription drug party. And, let’s say it’s capped at $545. BUT — not all your meds are going to participate in that deductible. You’ve got what we call a “tiered deductible.”

Let’s break it down. There are tiers — like having different shelves in your pantry for snacks. Some are special, others are just regular old chips and cookies.

Usually, there are five tiers:

  • On the lowest shelf … Tier 1, preferred generic meds — your budget-friendly buddies. You’ll see these with a ZERO-dollar co-pay.
  • Tier 2, the non-preferred generics, like getting store-brand cereal in a bag instead of the fancy box. If they have a co-pay, it’s probably $5-12.
  • Then, we move up to the brand-name territory …
  • Tier 3, the preferred brand names — and the co-pay gets much higher … maybe $47.
  • Tier 4, the NON-preferred brands. Very pricey. Now, you may be looking at a $100 co-pay.
  • And Tier 5, specialty drugs — think ultra-expensive ! At this level, you’ll likely see a variable co-pay … maybe 33% of the cost of the drug. If you have a drug that costs thousands of dollars, that gets very expensive very fast !

Your deductible usually kicks in for Tiers 3 and up. We’re talking about the good stuff — the preferred brand names, the non-preferred brands, and specialty drugs.

AND these co-pays aren’t helping you until you reach your deductible. Until then, you’re paying the full cost of your meds.

Let’s say in our scenario that you have a Tier 3 brand name drug that costs $109 a month. You’ll be paying the full price for FIVE months until you reach the $545 deductible, and then you move from the initial phase to the deductible phase. Then you’ll get our $47 Tier 3 co-pay until you reach the coverage gap, or “donut hole,” which is another whole conversation.

And here’s the real twist — not all plans have the same formulary. So, a drug might be a Tier 1 on one plan and a Tier 2 on another. It’s like musical chairs with prescriptions.

Knowing that — even if your plan has a big ol’ $545 deductible, it might still be a good deal if you’re only popping Tier 1 and 2 generics. The name of the game is finding a plan based on YOUR prescriptions. And here’s where it gets interesting …

To truly compare apples-to-apples — or, in this case, pills-to-pills — you need to do a little math. Add up your monthly premiums, toss in the deductible if it applies, and finally, add in all your copays. The grand total is your estimated annual cost for drugs. And that’s the key to figuring out which plan is hitting the most home runs for your money.

Now — when’s the best time to do this? You can switch during the Annual Election Period from OCTOBER 15th to DECEMBER 7th — it’s like Black Friday for Medicare.

Unless you’re an engineer ( yes, we know who you are ), you might be thinking, “I don’t have time for this!” Guess what? You don’t have to be a rocket scientist to figure it out. In 20 to 30 minutes, we can compare different plans with YOUR prescriptions. You don’t even have to break a sweat canceling an old plan. If you enroll in a new one, it’s all seamless.

So, there you have it — your Medicare Part D deductible demystified … sort of. With a little guidance, you’ll get this. The way I see it — we’re talking about YOUR health and YOUR wallet — let’s make sure both are in good shape.

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