18 Jun 2020

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prescription drug plans

No, PDP is not a drug. It stands for Prescription Drug Plan. Medicare beneficiaries have the option of enrolling in Part D: prescription drug coverage provided through private insurance companies. To avoid a Part D late enrollment penalty and likely higher prescription drug costs than without a plan, it is strongly suggested that beneficiaries add a separate Medicare PDP – whether you choose to stay with Original Medicare only or Original Medicare with Medigap (a supplemental plan that covers coinsurance). If you are in a Medicare Advantage plan (Part C), your PDP is typically part of the Advantage plan.

The wrinkle here is that chances are high you are already in or will choose to be in a PDP that is not the most cost efficient for your situation.

To best understand your options, it’s important to understand how PDPs are designed. All drugs are divided into tiers and formularies. The tiers are numbered from 1 to 5. The lower the tier the drug is in, the lower cost. A formulary can be thought of as a list of available drugs.

Now, here is the catch. Each Medicare PDP carrier (insurance company) has its own tiers and formulary. So both in theory and in reality, two carriers can have the same drug in different tiers, creating a substantial cost difference. The same applies to the formulary – one carrier can have a drug in its formulary and another carrier may not: also creating a large cost difference.

In addition to the actual drug cost variance between the carriers, every PDP carrier charges a monthly premium. And most have an annual deductible for tier 3 or higher drugs. The monthly premiums range from about $13 to $95 and the deductibles from $235 to $435, the maximum allowed by Medicare.

With Medicare approval, a carrier can move a drug to a higher or lower tier and/or add or remove a drug from their formulary. This usually happens with the tier 3 to 5 drugs, and there is no way to know in advance if a drug you are currently taking or might get prescribed during the year is going to have an increase or decrease in cost during the year.
So what do you really need to know? First, media bombardment by the insurance companies may get you to believe that the more you pay in premiums, regardless of drug costs, then the better off you are. But what you may not be thinking about is the most important concept here: The carriers do not make the drugs.

With that in mind, why would you pay a $35 to $95 monthly premium when you are taking tier 1 and/or 2 drugs that cost no more than $5 or so each per month when you can pay a monthly premium of about $13 for the same drugs?

To say it another way, the cost of your prescription drugs – no matter the tier of the drugs you are taking – is determined by a combination of the carrier’s premium, the actual drug costs, and the deductible . With as many as 35 to 40 PDP plans in the Westchester and Metro area, you can choose to stick with your current plan, try to figure out the most cost-efficient one on your own, or work with a Medicare professional.

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