is a type of cost-sharing
that refers to a fixed dollar amount
you pay for a medication assigned to a logical grouping or Tier of medications.
As reference, the Centers for Medicare and Medicaid Services (CMS) defines "copayment" as:
An amount you may be required to pay as your share of the cost for a medical service or supply, like a doctor’s visit, hospital outpatient visit, or prescription drug. A copayment is usually a set amount, rather than a percentage. For example, you might pay $10 or $20 for a doctor’s visit or prescription drug. [emphasis added] (Medicare & You Handbook)
Medicare Part D plans group their covered medications into logical groups known as drug tiers on their
formulary (drug list). Drug tier names and which drugs
are group in each drug tier can vary from Medicare Part D plan to plan.
Some examples of different formulary tier names are "preferred generics", "non-preferred generics", "preferred brands", "non-preferred brands",
"specialty drug tier".
Each drug tier on each Medicare Part D plan has its own cost-sharing (fixed co-payment or percentage of retail cost co-insurance).
Therefore, a medication that is grouped as a Tier 2 medication on one Medicare Part D plan, may be grouped as a Tier 3
medication in another plan. Naturally, the costs of the different co-pays also varies from plan to plan.
the co-pays for a "Preferred Generic Drug" Tier may vary from $0 to perhaps $7+, depending on the plan.
As an example, you may find on a particular Medicare Part D plan that the medication ADVAIR DISKUS MIS 100/50
as a Tier 3 "preferred brand" medication costing the plan beneficiary 17% co-insurance per month (that is, 17% of the plan's retail drug price).
The retail cost for the medication is estimated at $340 to $350 (or higher depending on the plan).
Another plan may have the same drug classified
as a Tier 3 medication, costing $47 per month.
In this drug example,
the co-payment ($47) is more economical as compared to 17% co-insurance (with $340 retail price, your cost at the pharmacy would be about $58).
many other medications, the co-insurance (percentage of retail) cost-sharing is more
cost-effective as compared to a fixed co-payment.
In the end, the cost-sharing difference between co-pay and co-insurance will depend on the medication, the plan's formulary drug
tier, the plan's cost-sharing structure, and the Medicare Part D plan's negotiated retail drug price.
You can compare the cost-sharing tier, average retail cost, and drug usage management restrictions for each plan covering a
particular medication using our Drug Finder (https://Q1Rx.com
See also our Frequently Asked Questions "What is Co-Insurance?
" and "What is Medicare Part D or Medicare Advantage plan cost-sharing