How Do Prescription Drug Plans Work?

Here is important information you need to know about owning a prescription drug plan:

  • Annual Deductible — There is a deductible you must pay for a Part D plan that normally applies only to formulary tiers 3,4 & 5, Your deductible may be different, or waived entirely, but the max amount you can be charged is $445 in 2021. You will pay a discounted price for your medications until you have satisfied the deductible. After that, you begin initial coverage.
  • Initial Coverage — During initial coverage, you pay a tier specific copay for your medications based on your plan’s formulary table. Each prescription drug plan grades covered medications in to tiers. Typically there are 5 tiers defined as preferred generic, generic, preferred brand, non-preferred drug & specialty. In 2021 the initial coverage cap is $4,130. After you and the insurance company together have paid this amount, then you enter the coverage gap sometimes referred to as "The Doughnut Hole".
  • The Coverage Gap (Doughnut Hole) – During the coverage gap, you'll pay no more than 25% of the cost for your plan's covered brand-name and generic drugs. The coverage gap phase continues until you have paid $6,550 true out of pocket (TrOOP) for 2021 ...Note, For brand name drugs only: you get to add the manufactures 70% credit towards your TROOP costs. So basically your paying 25% but able to claim 95%. For generic medications Medicare covers 75% but you can only claim your 25% costs.
  • Catastrophic Coverage – Once past the coverage gap, you will pay 5% of the cost for all formulary medications but no less than $3.70 for generic & $9.20 for name brand the rest of the year.

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