When you discuss Medicare prescription coverage with clients, understanding prescription drug tiers is imperative. Medicare Part D or Medicare Advantage plans place each drug into a specific tier. These tiers impact how much enrollees pay out of pocket for prescriptions. When clients know the tiers their medications are on, they can make informed choices and potentially save money.
What are prescription drug tiers
Prescription drug tiers are cost levels assigned to different medications within a plan’s formulary (the list of drugs each plan covers). Generally, lower-tier drugs cost less, while higher-tier drugs have higher copays or coinsurance.
Prescription drug tiers
Most Medicare Part D and Medicare Advantage drug plans use a 5-tier system, but some may vary slightly. Here’s a general breakdown:
Tier 1 – Preferred Generic Drugs
- Least expensive tier
- Includes common, low-cost generic drugs
- Lowest copay
Tier 2 – Non-Preferred Generic Drugs
- Slightly more expensive than Tier 1 drugs
- Includes common, low-cost generic drugs
- Higher copay than Tier 1
Tier 3 – Preferred Brand -Name Drugs
- Brand-name drugs that the insurance company has negotiated lower prices for
- Higher copay or coinsurance than generic drugs
Tier 4 – Non-Preferred Brand-Name Drugs
- Higher-cost brand-name drugs
- May require prior authorization or step therapy
- Higher copay or coinsurance than lower tiers
Tier 5 – Specialty Drugs
- Highest cost medications, often for complex or chronic conditions
- Typically require prior authorization
- Coinsurance instead of a set copay. In other words, beneficiaries pay a percentage of the drug cost.
In some cases, the necessary drug is not on the plan’s formulary. In that case, the beneficiary needs to request a formulary exception.
Use drug tiers to your advantage
Check the plan formulary – Every Medicare Part D or Medicare Advantage drug plan has a unique formulary. Look up medications to see which tier they fall into to see which plan is the best option.
Consider generic alternatives – Beneficiaries should ask their doctor or pharmacist if a Tier 1 or Tier 2 generic is available instead of a higher-tier brand-name drug.
Use preferred pharmacies – Many plans offer lower prices when beneficiaries fill prescriptions at “preferred” network pharmacies.
Look into tier exceptions – If a prescribed drug is in a high-cost tier, beneficiaries can request a tier exception from their plan, which may reduce their cost.
Compare plans during open enrollment – Each year, Medicare beneficiaries can review and switch plans during the Annual Enrollment Period (AEP) from October 15 to December 7 to find a plan that better suits their prescription needs.
Prescription drug tiers can significantly impact medication costs, but understanding how they work allows beneficiaries to make cost-effective choices. Always review the plan’s formulary, consider generics, and explore savings options like tier exceptions or different pharmacies. A licensed Medicare agent can help navigate drug coverage costs and plan options.