There are a number of costs associated with your Part D plan. You may have a monthly premium, an annual deductible, and coinsurance amounts or copayments for your covered drugs.
- A premium is an amount you pay monthly to have coverage. In 2020 the national average Part D premium is $32.74.
- An annual deductible is an amount you must pay out of pocket before your plan begins to cover your prescription drugs. Not all Part D plans have a deductible. In 2020 the maximum deductible is $435.
- Coinsurance or copayment is the amount you pay out of pocket for your covered drugs. A coinsurance is a percentage amount of the cost of the drug. If your plan charges a 15% coinsurance for covered generic drugs, that means you pay 15% of the cost of that drug. A copay is a set amount, such as a $20 copay for a covered generic drug.
Many Part D plans use tiers to price the drugs listed on their formularies. Typically, drugs in lower tiers are less expensive and drugs in higher tiers are more expensive. A sample tier structure may be:
- Tier 1: Generic drugs
- Tier 2: Preferred brand-name drugs
- Tier 3: More expensive brand-name drugs
- Tier 4: Specialty drugs.
Note: These are not official drug tiers. Some generic drugs may be in higher tiers.
When selecting a Part D plan, it’s important to consider how much you will be paying each month for your drugs. This includes noting if your drugs are in lower or higher tiers on the plan’s formulary and what their copayment or coinsurance charge will be.
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