June 27th 2023
By Ari Parker
Understanding drug tiers and how they work is critical when selecting the best Medicare Advantage or prescription drug plan to cover your prescriptions.
Original Medicare does not cover prescriptions, but beneficiaries can secure prescription drug (Part D) coverage through either a standalone prescription drug plan (PDP) or a Medicare Advantage plan that includes prescription coverage (MA-PD). A lot goes into choosing the right prescription drug coverage for your needs, including premiums and out-of-pocket costs for the prescriptions you need. Coverage for prescriptions varies from plan to plan, and even if a prescription is covered, it may be more or less expensive depending on what tier it's on within a plan's prescription drug list.
All Medicare drug plans have a Prescription Drug List (PDL), also commonly referred to as a formulary. The PDL is a list of the medications covered by your Medicare Advantage or prescription drug (Part D) plan. This list includes both generic and brand-name prescription drugs.
While each plan has a unique list, PDLs generally have at least two medications within each commonly prescribed drug category and class. For example, lists typically include two ACE inhibitors for high blood pressure. Including more than one medication per category gives patients and healthcare providers options when selecting medications for treatment.
Many people are unaware that Medicare plans can change their drug formularies at any time. Changes often depend on things like drug recalls, changes in standard medical practice, the addition of generic options, or price changes by drug companies. You should receive information about changes affecting the drugs you’re taking, and if you have any questions, you should reach out to an independent Medicare agent for support. You can also check your plan’s prescription drug list anytime by logging in to your plan’s website or calling your insurance company directly.
Medicare drug plans divide medications into categories based primarily on price. Plans typically have 3-5 tiers in their formulary, and each plan provider is responsible for deciding which drugs fall within which tiers. Plan providers can also negotiate prices with drug companies to fit some medications into lower-cost tiers for their plans.
The lowest tier in a formulary (tier 1) includes the lowest-cost drugs. These are often generics and have the lowest copays. Higher tiers include more expensive medications. These are typically brand-name drugs with higher copays. The table below illustrates an example of a tiered formulary plan.
| Tier | Type of Medication | Your Cost |
|---|---|---|
| Tier 1 | Most Generic Medications | Lowest Copay |
| Tier 2 | Common/Preferred Brand-Name Drugs and High-Cost Generic Drugs | Medium Copay |
| Tier 3 | Non-preferred Brand Name Drugs | High Copay |
| Tier 4 | Specialty and High-Cost Drugs | Percentage of Drug Cost |
In addition to categorizing medications by tiers, your plan will also have a list of preferred and non-preferred medications. Medicines on the preferred list will be approved for coverage and have a lower copay. Your plan may not cover non-preferred drugs. If they are covered, they will be more expensive than preferred drugs.
If your Medicare prescription drug plan doesn't cover your prescriptions, you have options to try to get the drug coverage you need. During Medicare's annual Open Enrollment Period, you can work with a Chapter Advisor to swap out your current drug plan for one that covers the medications you need.
If the Open Enrollment Period is too far away, you can also request an exception. If you and your prescriber determine a specific medication is the best option for you, your prescriber can ask for an exception to include the medication in your coverage. You must provide supporting documentation to explain why that particular medication is better than your plan's preferred medications. If granted, the exception will allow you to get your medication at a lower cost.
Finding the best Medicare drug plan for your needs doesn’t have to be complicated. A Chapter Medicare Advisor will make the process easy by taking note of your prescriptions and helping you compare the premiums and out-of-pocket costs of plans available to you. Get started by calling us at (855) 900-2427 or scheduling an appointment at your convenience.
