Key Takeaways
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Failing to review your Medicare drug plan annually can lead to unexpected out-of-pocket costs and coverage gaps.
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Misunderstanding how drug tiers, formularies, and prior authorization work may result in higher expenses and limited access to necessary medications.
Ignoring Annual Plan Reviews Can Lead to Unexpected Costs
Many Medicare beneficiaries assume that once they enroll in a prescription drug plan, they’re set for life. However, Medicare Part D and Medicare Advantage drug plans change every year, altering formularies, premiums, deductibles, and copayments. If you don’t review your plan during the Medicare Open Enrollment Period (October 15 to December 7), you could be stuck with higher costs or limited medication coverage in the new year.
What Can Change Each Year?
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Your plan’s drug formulary (list of covered medications)
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Tier placement of drugs, which affects copayments
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Premiums, deductibles, and out-of-pocket costs
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Preferred pharmacy networks
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Rules regarding prior authorization and step therapy
If you don’t review these changes, you may pay more than expected when picking up prescriptions in January. Medicare provides an Annual Notice of Change (ANOC) each fall—make sure to read it carefully.
Overlooking Drug Tiers and Formularies Can Cost You More
Not all prescription drugs are priced equally under Medicare plans. Most plans use a tiered formulary system, categorizing medications into different cost levels. Many beneficiaries make the mistake of assuming their plan will cover their prescriptions affordably, only to be surprised at the pharmacy.
How Drug Tiers Work
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Tier 1 – Preferred generic drugs (lowest cost)
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Tier 2 – Non-preferred generics (higher cost than Tier 1)
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Tier 3 – Preferred brand-name drugs (moderate cost)
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Tier 4 – Non-preferred brand-name drugs (higher cost)
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Tier 5 – Specialty drugs (highest cost)
If your medication moves from a lower tier to a higher tier, your copay or coinsurance could increase significantly. Checking your plan’s formulary each year ensures you’re not blindsided by unexpected cost changes.
What You Can Do
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Ask your doctor if there’s a lower-tier alternative.
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Use Medicare’s Plan Finder tool to compare costs.
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Consider switching plans if your current one no longer covers your medications affordably.
Not Understanding Prior Authorization, Step Therapy, and Quantity Limits
Many Medicare drug plans impose rules that could delay access to your prescriptions or require additional steps before coverage kicks in. These restrictions are meant to control costs but often leave beneficiaries frustrated and facing unexpected hurdles.
Common Restrictions to Be Aware Of
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Prior Authorization – Your doctor must get approval from your plan before certain medications are covered.
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Step Therapy – Your plan may require you to try a lower-cost drug before covering a more expensive option.
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Quantity Limits – Your plan may limit the amount of medication you can receive at one time.
Failing to anticipate these requirements can mean delays in getting your medication or even denials at the pharmacy counter.
How to Avoid Coverage Delays
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Check your plan’s formulary to see if your medications have restrictions.
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Talk to your doctor about alternatives if prior authorization or step therapy applies.
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Submit paperwork early if prior authorization is required.
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Request an exception from your plan if medically necessary.
Missing Out on Extra Help and Cost-Saving Opportunities
Many Medicare beneficiaries are unaware that there are programs designed to reduce prescription drug costs for those who qualify. If you don’t explore your options, you may be spending more than necessary on medications.
Programs That Can Help Reduce Costs
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Extra Help (Low-Income Subsidy) – Provides assistance with Part D premiums, deductibles, and copays for those who meet income and asset limits.
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State Pharmaceutical Assistance Programs (SPAPs) – Some states offer additional help for Medicare beneficiaries.
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Manufacturer Assistance Programs – Some drug manufacturers offer discounts or coupons for eligible individuals.
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Preferred Pharmacies and Mail-Order Options – Using a preferred pharmacy or mail-order service can lower costs.
Steps to Take
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Check your eligibility for Extra Help through the Social Security Administration.
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Look into your state’s assistance programs.
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Ask your pharmacist if there are discounts available.
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Compare pharmacy prices using Medicare’s Plan Finder.
Take Control of Your Prescription Drug Costs
Understanding how Medicare prescription drug coverage works can help you avoid costly mistakes. Reviewing your plan annually, checking formularies and drug tiers, anticipating coverage restrictions, and exploring cost-saving options can all make a big difference in managing your expenses. If you’re unsure which plan best meets your needs, speaking with a licensed agent listed on this website can provide professional guidance tailored to your situation.
