The Medicare Part D formulary tiers have different types of drugs, both generic and brand name, covered for different prices. Most commonly there are tiers 1-5, with 1 covering the lowest-cost drugs and 5 covering the most expensive specialty medications. Below is an example of how the most common five-tier system might look:
Medicare Part D Tier 1:
Tier 1 is the least expensive Medicare Part D tier, and includes the lower-cost preferred generic drugs. Preferred drugs means a certain set of types of medications that have been approved by the insurance company to be in this low-cost grouping. Generic refers to non-name brand versions of each type of drug.
Medicare Part D Tier 2:
Tier 2 includes non-preferred generic drugs, which refers to higher-cost generic drugs. It costs more than tier 1 in copays. Tiers 1 and 2 are often set up to exempt you from paying a deductible, whereas with drugs in the higher tiers you may have to pay the full drug cost until you meet the deductible, then pay a copay/coinsurance.
Medicare Part D Tier 3:
Tier 3 includes preferred brand drugs. This means it will include lower-cost brand-name drugs.
Medicare Part D Tier 4:
Tier 4 includes non-preferred brand-name drugs, so the copays will be higher for drugs in this tier.
Medicare Part D Tier 5:
Tier 5 is known as the specialty tier and covers specialized drugs that require special handling, such as injectables, and rare drugs that are not easily accessible. It is the most expensive of the tiers. Most plans will charge a fixed percentage of the drug cost—commonly around 25%, known as coinsurance—instead of a flat dollar amount—copay—for drugs in this tier.
Here are a few common questions about these tiers:
How do I know which tier the drug I take will be?
Which tier your drug needs depends on the formulary of your Medicare Part D plan. Every Medicare Prescription Drug Plan is required to have a list of covered drugs called a formulary. You can find out the drug Tier for each of your covered drugs by checking the plan’s formulary.
Will I have any restrictions on drugs covered by my plan?
For some higher-cost drugs, your plan may require step therapy, which has you try the lower-cost options for each condition as a first step. Then, if it doesn’t work, you can move up to the more expensive and/or name brand versions of the drugs for your condition(s) until you find the lowest-cost option that works for you.
There may also be quantity limits of certain drugs in place or a mandate of prior authorization to take certain types of drugs.
How do I know if I need name-brand or generic drugs?
In general, the choice of generic vs. name-brand drugs is a decision between you and your doctor, but it may vary based on which drug you need, your health status, and how much you are willing to pay out-of-pocket.
Talk to your doctor about whether the generic version of the drugs you need are adequate or whether you would personally benefit from the name-brand version of these medications to find out which one is right for you. Your drug plan may require step therapy for some name brand drugs they cover (see question above).
What is Medicare Part D Tier 6?
Each Medicare Part D formulary is different, so some might include more tiers like a Tier 6 Select Care. Tier 6 tends to refer to a few generic drugs for diabetes and high cholesterol available with some specific insurance plans. Tier 6 is designed to offer an affordable option for some of the most commonly needed drugs, and tend to cover only those specific drugs.
How can I see which drugs are covered under which plan?
There are drug lists available on your plan’s drug formulary that explain exactly which drugs are covered and at what prices under each tier. You can find the drug formulary on the health insurance carrier’s website or talk to a licensed insurance agent who can help you compare options for drug costs and see if you can save.
What happens if I opt for a Medicare Advantage plan?
Some Medicare Advantage plans, known as Medicare Advantage Prescription Drug Plans (MAPD), include Part D coverage. In MAPD plans, the portion of the plan that covers drugs will follow the same standards as stand-alone prescription drug plans. So, you will want to check the plan’s formulary to see how your medications are covered.