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 copayment or percentage of retail cost coinsurance).
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 copays also varies from plan to plan.
For instance,
the copays 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% coinsurance per month (that is, 17% of the plan's retail drug price).
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% coinsurance 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 copayment ($47) is more economical as compared to 17% coinsurance (with $340 retail price, your cost at the pharmacy would be about $58).
However with many other medications, the coinsurance (percentage of retail) cost-sharing is more cost-effective as compared to a fixed copayment.
In the end, the cost-sharing difference between copay and coinsurance 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 ( on this site)
See also our Frequently Asked Questions "What is coinsurance?" and "What is Medicare Part D or Medicare Advantage plan cost-sharing?"