As we inch closer to the Medicare Annual Enrollment Period, it is important to truly understand the different Medicare drug tiers and what they mean. It is one element to finding the best Medicare plan for you.
The drug list, or formulary, is a list of prescription drugs that are covered by a specific health care plan. A formulary can contain both name-brand and generic drugs. Over-the-counter drugs and drugs not approved by the FDA are not approved by Medicare and therefore are not part of the formulary.
The formulary consists of five cost sharing tiers:
Cost-Sharing Tier 1: Preferred Generic
- Tier 1 is the lowest tier. Low cost preferred generic drugs are included in this tier.
Cost-Sharing Tier 2: Generic
- Tier 2 includes preferred generic drugs.
Cost-Sharing Tier 3: Preferred Brand
- Tier 3 includes preferred brand drugs and non-preferred generic drugs.
Cost-Sharing Tier 4: Non-Preferred Drug
- Tier 4 includes non-preferred brand drugs and non-preferred generic drugs.
Cost-Sharing Tier 5: Specialty Tier
- Tier 5 is the highest tier. It contains very high cost brand and generic drugs, which may require special handling and/or close monitoring.
It is important to understand that a particular drug may be categorized differently by each company, which could drastically impact the cost of your premiums. In addition, the formulary may change during the year. Drugs may be added or removed from the formulary, they may be moved to different cost-sharing tiers, or new restrictions may be added. However, each company must follow Medicare rules in making these changes. In these cases, if the changes have a negative impact, there are options available that may off-set the changes.
Understanding the formulary and drug tiers is an important aspect in finding the best health care plan for you, making the most informed decision, and staying on track through your retirement years.