You will only pay the Tier 1 or Tier 2 copayment for your medications, if these two formulary tiers are excluded from the initial deductible - even when the plan's initial deductible
is not yet met.
An increasing number of Medicare Part D drug plans
now exclude low-cost formulary Tier 1 and Tier 2 drugs from the plan's initial deductible and you have immediate coverage for most low-costing drugs. Meaning that, from the very start of the plan year, you will pay just Tier 1 and 2 copays for these drugs (unless the retail price is less than the copay and then you will pay no more than the retail price) - and your initial deductible will only be applied to more-expensive brand-name drugs or drugs on higher formulary tiers.
But remember, not all Medicare drug plans provide immediate coverage for your generic drugs. If your Medicare Part D plan does not exclude any tiers from
the initial deductible, then you must pay your Medicare Part D plan's
initial deductible before you receive any coverage from your Medicare
Part D plan. For
example, the standard 2023 Medicare Part D deductible
is $505 and
you must pay the full retail price for your formulary drugs until you
have spent $505 out of pocket. When the initial deductible is met, then
the Medicare plan coverage
begins and you will only pay a portion of the retail drug cost.
Example Purchase #1 of a Tier 2 drugs excluded from the initial deductible.
Your Medicare Part D plan's initial deductible: $505 (still unchanged)
Your plan's Tier 2 drug copay: $3
Your Tier 2 drug's retail price: $15
If your Medicare Part D drug plan has a $505 standard deductible, but excludes Tier 1 and Tier 2 drugs from the deductible, and you purchase a Tier 2 generic drug
that has a retail price of $15 (with a copay of $3) – you pay only the $3 copay and your $505 deductible is not affected.
(see: https://www.csscoperations.com/internet/Cssc.nsf/ files/PDEParticipantGuide%20cameraready%20081811.pdf/ $FIle/PDEParticipantGuide%20cameraready%20081811.pdf )
Example Purchase #2 of brand-name Tier 3 drug impacting the initial deductible.
Your plan's Tier 3 drug copay: $43
Your Tier 3 drug's retail price: $340
If you have a Tier 3 formulary medication
that costs $340 (retail) and your Medicare plan has a standard 2023 deductible of $505
– and the Tier 3 medication has a $43 copay, you would pay the full retail
drug price of $340 and you would have a new deductible balance of $165 ($505 - $340).
And the full $340 retail value of the formulary drug would count toward
reaching your plan's Initial Coverage Limit
and entering the Donut Hole or Coverage Gap.
Question: But what happens if I only buy formulary drugs excluded from the deductible, will I ever enter the Donut Hole?
In the examples above (with Tier 1 and Tier 2 drugs excluded from the deductible), if you were to only purchase Tier 1 and Tier 2 drugs all year, your $505
initial deductible would never be met. However, you enter the Donut Hole (or leave the Initial Coverage Phase
) based on the retail value of the formulary drugs you purchase.
So, if your total retail drug cost
exceeds your Initial Coverage Limit
($4,660 in 2023
), you would still enter your plan's Coverage Gap or Donut Hole - and continue to move through your plan's coverage - and the plan's initial deductible is no longer an issue.
As noted by Medicare in the September 10, 2010 memorandum, "Additional Guidance Concerning Closing the Coverage Gap in 2011",
"With the implementation of the [Medicare Coverage Gap Discount Program], however, CMS finds it necessary to clarify that for purposes of the [Medicare Coverage Gap Discount Program] only beginning in 2011, a Part D deductible ceases to apply once a beneficiary’s total gross covered drug costs exceed the [Initial Coverage Limit]. This means that for a beneficiary enrolled in a Part D plan with a brand-only deductible, applicable (i.e. brand) drugs that would otherwise be subject to the deductible will be eligible for a coverage gap discount once the beneficiary’s total gross covered drug costs exceed the [Initial Coverage Limit] even if the beneficiary has not satisfied the deductible."
Example of purchasing a Tier 3 or a Tier 6 insulin product when you haven't met your plan's deductible.
You will pay a copay of no more than $35 for a 30-day supply of a formulary insulin product even though you have not met your plan's annual initial deductible.
Beginning in 2023, all Medicare drug plans will offer all insulin on the plan's formulary at a copay of no more than $35 (per month) based on the 2022 Inflation Reduction Act
The 2022 IRA stipulates that Medicare Part D drug plans must offer various types and forms of insulin for a 30-day copay of $35 (or less) and will keep this low cost-sharing throughout all phases of coverage including: the plan's Initial Deductible, Initial Coverage phase, and the Coverage Gap (or Donut Hole). If you have high prescription costs and reach the Catastrophic Coverage phase, you still will pay $35 or less for your insulin for the remainder of the year.Important:
Unlike a Tier excluded from the deductible (such as in the example above), the 2023 purchase of a plan's covered insulin product will reduce a person's initial deductible by the total retail cost of the insulin product.
For example, if a plan's negotiated retail cost for insulin is $200 and a person has not yet met the 2023 deductible of $505, the person will pay no more than $35 for the formulary insulin product, but the deductible will be reduced by the $200 retail insulin cost - and so the remaining deductible would now be $305.
For more information please see our FAQ: "How does the purchase of a Medicare Part D insulin affect my drug plan's deductible?
Question: How do you know whether a Medicare plan excludes Tier 1 and Tier 2 drugs from the initial deductible?
You will notice when you visit our Medicare Part D Plan Finder
that Medicare Part D plans will be marked under the "Deductible"
section with the text "Tier 1 exempt" or "Tier 1 and 2 exempt".
Here is an example of 2021 Florida Medicare Part D plans having lower-costing generics excluded from the standard deductible.
And here is an example of a 2022 Medicare Part D plan having Tier 1,
Tier 2, Tier 3, and Tier 6 drugs excluded from the plan's initial $100
In addition, when you view the Medicare plan details (by clicking on the
Medicare plan name), you can see in the plan details that Tier 1 and
Tier 2 drugs may be excluded from the plan's initial deductible.
As an example using the Q1Rx Drug Finder, in 2023, Florida has 23 stand-alone Medicare Part D plans
that cover “MONTELUKAST SOD 10 MG TABLET [Singulair] (30 TABLETS) (NDC: 65862057490)” and you can click on the Medicare plan name
to see more details of the coverage for a particular plan.
In the Q1Rx Drug Finder, you can see that some drugs are marked as (1*
and this means that the Tier 1 or Tier 2 drug has is excluded from the
plan's initial deductible - and receives coverage according to the
Need more help? Contact your plan and review your plan's documentation.
You can learn more by contacting your Medicare Part D prescription drug
plan by calling the toll-free number for Member Services found on your
Member ID card.
You can also read more about your drug plan coverage in your Medicare
plan's Evidence of Coverage document where you might find in Chapter 4,
"What you pay for your Part D prescription drugs":
"During the Deductible Stage, you pay the full cost of your Cost-Sharing
Tier 3, Cost-Sharing Tier 4, and Cost-Sharing Tier 5 drugs" and then,
"You stay in the Deductible Stage until you have paid [annual deductible amount] for your
Cost-Sharing Tier 3, Cost-Sharing Tier 4, and Cost-Sharing Tier 5
Further on in the Evidence of Coverage Chapter 4 you can read:
"The Deductible Stage is the first payment stage for your drug coverage.
You will pay a yearly deductible of [annual deductible amount] on
Cost-Sharing Tier 3, Cost-Sharing Tier 4, and Cost-Sharing Tier 5 drugs.
You must pay the full cost of your Cost-Sharing Tier 3, Cost-Sharing
Tier 4, and Cost-Sharing Tier 5 drugs until you reach the plan's
deductible amount. For all other drugs you will not have to pay any
deductible and will start receiving coverage immediately.
The Initial Deductible and the Donut Hole.
• Your "full cost" is usually lower than the normal full price of the
drug, since our plan has negotiated lower costs for most drugs.
• The "deductible" is the amount you must pay for your Part D prescription drugs before the plan begins to pay its share.
Once you have paid [the annual deductible amount] for your Cost-Sharing
Tier 3, Cost-Sharing Tier 4, and Cost-Sharing Tier 5 drugs, you leave
the Deductible Stage and move on to the next drug payment stage, which
is the Initial Coverage Stage."
Remember, your Medicare Part D plan's Initial Deductible does not affect
when you enter the Donut Hole or Coverage Gap. You enter the Donut
Hole based on the retail value of the prescriptions you purchase - not
the coverage cost (what you pay).
However, your Initial Deductible (your out-of-pocket spending) will impact
how quickly you exit the Donut Hole. You can click here to read more about the impact of your Initial Deductible