In light of the Affordable Care Act or talk about saving Medicare gaining all of the attention, Medicare is often forgotten. Navigating Medicare prescription drug plans (PDP) remains a daunting challenge. Even seniors who can navigate these plans without the help of a trusted confidant or power of attorney (POA) face tremendous challenges under these plans. With many Medicare recipients on multiple medications and constantly changing plans, maintaining adequate coverage at the lowest possible prices remains an ongoing struggle.

Moreover, PDP members face a December 7th deadline, so understanding changes for 2018 as soon as possible remains critical. Still, understanding how PDPs work (or having help that can understand) and the resources available can save money and avoid coverage issues in the future.

Understand the phases of each plan

Every Medicare prescription drug plan has four phases:

  1. Deductible – The maximum deductible stands at $405 for 2018. However, some choose to charge a lower deductible, and some choose to charge a $0 deductible.
  2. Initial Coverage Phase – In this phase, PDP companies place drugs into a number of tiers (usually 4 or 5 tiers) based on the retail cost of the drug. Here, PDP plan members pay a copay (a fixed amount) or coinsurance (a percentage of the drug’s true cost). This phase applies until the retail cost (which should not be confused with the copay) of one’s drugs rises to $3.750.
  3. Coverage Gap (also called the “donut hole”) – In this phase, PDP members pay 35% of the retail cost for brand-name drugs and 44% of the cost of generic drugs. These prices hold until true out-of-pocket (TrOOP) costs (which should not be confused with the RETAIL threshold of $3,750 from the initial phase) reach $5,000.
  4. Catastrophic Phase – In this phase, PDP members pay the higher of 5% of the retail costs, or $3.35 for generic and $8.35 for brand drugs.

People should not assume they will experience all phases.

If one has $2,000 per year in retail prescription costs, they’ll end the year in the initial coverage phase. A lucky few will even end the year in the deductible phase.

However, for those PDP members who enter the coverage gap or catastrophic phases, it should be understood that ALL plans have these phases. If one has more than $3,750 in retail prescription costs, no plan will keep them out of the coverage gap.

Also, be aware of retail costs vs. TrOOP, or out-of-pocket costs. Retail costs are what drugs cost if one buys without the help of a plan. TrOOP costs are what the member pays out-of-pocket. Some help with coverage gap costs comes from Medicare, so people will have spent well under $5000 of their own money if they make it to the catastrophic phase.

Understand formularies

A formulary is a list of drugs covered by a prescription plan.

Different plans have different formularies, so one cannot assume every plan covers their drug. Moreover, even within a plan, formularies change over time. Formularies rarely change in the middle of a plan year, typically only when a drug is no longer available or when a generic is released (which benefits the plan holder). However, for a new year, drug tiers can be adjusted, or drugs can be dropped from a formulary altogether.

This remains a scary prospect for PDP members as plans often don’t inform members if a drug is not covered in the next year. By the time one finds out in January that a drug is no longer covered, they’ll be well past the December 7th deadline.

Know the pharmacy types

All plans have two categories of pharmacies: preferred pharmacies and standard pharmacies. Preferred pharmacies, as the name implies, are the pharmacies the plan prefers members use, and they offer deeper discounts. Standard pharmacies still are on plans but using these pharmacies involves higher costs than preferred pharmacies.

All PDP members should make sure their current plan affords access to preferred pharmacies or a standard pharmacy at the very least. For example, users of the Humana Walmart Rx Plan must use Walmart or Sam’s Club to receive preferred discounts. Most plans offer more preferred pharmacies, but one cannot expect to receive the same discount at every pharmacy.


The website has a feature called the prescription profiler. Starting on October 1 of every year, PDP members can enter their drug list and preferred pharmacy into their prescription profiler. This system will tell the PDP member which plans afford them the lowest cost based on the drugs and pharmacies used. can serve as a valuable resource for both lowering costs, and finding out sooner rather than later if a drug will no longer be covered. Assuming PDP members perform the analysis well before December 7th, they have time to consult a physician to discuss options if one has trouble finding a plan that covers all drugs at an affordable cost.

Also, those that chose a 2018 plan and now want to make a different choice can still change plans until the December 7th deadline.

Final thoughts

Navigating the maze of prescription drug plans remains difficult. For older PDP members who are unable to understand these plans, bringing in a trusted family member or friend as an assistant or a POA is critical to navigating this process well. However, if the PDP member or POA understands the resources available, they can find a plan that both saves money and avoids the pitfalls that befall so many Medicare recipients.

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