You will pay the Tier 1 or Tier 2 co-payment for your medications, if these two formulary tiers are excluded from the initial deductible - even when the initial deductible is not yet met.
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 2020 Medicare Part D deductible is $435 and
you must pay the full retail price for your formulary drugs until you have spent $435 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 for a typical Tier 3 drug impacting the initial deductible
If you have a Tier 3 formulary medication
that costs $310 (retail) and your Medicare plan has a standard 2020 deductible of $435
– and the Tier 3 medication has a $43 co-pay, you would pay full retail
of $310 and you would have a deductible balance of $125 ($435-$310). And the full $310 retail value of the formulary drug would count toward reaching your plan's Initial Coverage Limit
and entering the Donut Hole or Coverage Gap.
Example for Tier 1 and Tier 2 drugs excluded from the initial deductible
An increasing number of Medicare Part D plans
exclude Tier 1 and Tier 2 drugs from the plan's initial deductible and
these low-costing drugs are not impacted by your initial deductible and
have immediate coverage. So, if you have a $435 standard deductible with Tier 1 and Tier 2 drugs excluded, and you purchase a Tier 2 generic drug
that has a retail price of $28 (with a co-pay of $10) – you pay only the $10 co-pay and your $435 deductible is not affected.
As a note of interest . . .
In this example, if
you were to only purchase Tier 1 and Tier 2 drugs all year, your $435
deductible would never be met. But, if your total retail drug cost
exceeds your Initial Coverage Limit ($4,020 in 2020), you would still enter your plan's Coverage Gap or Donut Hole.
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
(PDP-Finder.com) that Medicare Part D plans will be marked under the "Deductible" section with the text "Tier 1 and 2 exempt".
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, in 2020, Florida has 27 stand-alone Medicare Part D plans
that cover “MONTELUKAST SOD 10 MG TABLET [Singulair] (30 EA) (NDC: 29300022019)” and you can click on the Medicare plan name
to see more details of the coverage for a particular plan.
The Initial Deductible and the Donut Hole.
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. 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