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NJ Life & Health Insurance Group
  • Writer's pictureKen Connolly

How Do Prescriptions Work with Medicare?

Prescriptions these days can be expensive, especially for seniors who may be on multiple medications. Medicare beneficiaries want to do their due diligence and make sure they are getting their prescriptions for the lowest price possible. Many people ask us what they can expect to pay for their medications once they formally go onto Medicare.

This article is meant to give you a general overview of how prescriptions work under Medicare. It will also show you what steps you can take moving forward. If you would like to understand these concepts in more detail, visit our post on drug cost calculations.

Medicare Prescription Basics:

Let’s start with a summary of how prescriptions work while you are on Medicare. For starters, Original Medicare does NOT cover prescriptions. If you simply go onto Medicare and do nothing else, you will be stuck paying the full retail price of all your medication. Luckily, you can get help from a trusted Medicare broker to get coverage for your prescriptions. You have 2 options available: A Medicare Prescription Drug Plan (PDP) or a Medicare Advantage Prescription Drug Plan (MAPD).

A traditional Medicare Prescription Drug Plan (PDP) is an additional insurance policy purchased on top of Original Medicare and your Medicare Supplement. It will have a separate monthly premium and will help cover prescriptions you receive from your pharmacy. With these plans you are responsible for the monthly premium, and copays each time you pick up your prescriptions.

You could also elect to have a Medicare Advantage with a Prescription Drug Plan (MAPD). Medicare Advantage is a private insurance plan that parallels Original Medicare. These plans tend to have a low or $0 monthly premium, but you will still be responsible for copays when you pick up your prescriptions. Enrolling in an MAPD means you are joining a Medicare equivalent plan offered by a private company, which is serious. Be sure to check with your broker if this is the right course of action.

Do I Need to Have Additional Prescription Coverage?

Even if you are on no prescriptions at the moment, it makes sense to have some sort of Medicare prescription coverage for 2 reasons. First, Medicare will penalize you if you don’t have prescription coverage for an extended period. And once you accrue this penalty, it never goes away. Second, you are given a limited window to sign up for these plans every year. If you don’t have coverage and suddenly are prescribed an expensive prescription, you may have to wait months to enroll into a new plan. You will be stuck paying full price during this time.

Which Medicare Prescription Plan is Right for Me?

Now that we have gotten the basics of how prescriptions are covered on Medicare, we can start to figure out what plan is right for you. Each state has different plans that cover different medication at different prices. Finding the best plan for you depends on a variety of factors. Each person takes a different plan for a different reason. It always makes sense to speak with a licensed Medicare broker to figure out what the best course of action is. Below are the different variables we consider to help you with this decision.

Your Prescriptions

There are many factors that go into determining the cost of your prescriptions on Medicare. The first is what specific medication you are on. Every plan has a formulary, or list of medications they cover and at what price. Each formulary must cover at least 2 brand name and 2 generic medications in each therapeutic category, which means every plan will have coverage for every category of mediation. But this also means each plan will choose different drugs in each category to cover, resulting in different plans covering different medications. This will be the first factor that may push you towards one drug plan or another - which plans actually cover your medications.

The second factor that will help determine which plan is best is the cost of your medications in each plan. Every plan “tiers” your medication which helps determine the price or copay. Each plan has tiers from 1 through 5 or 1 through 6. Tiers 1 & 2 are reserved for generic drugs, while Tiers 3-6 are generally reserved for brand name and specialty drugs. Tiers 1 & 2 tend to be low cost, and usually include generics for cholesterol, high blood pressure, and more. Tiers 3-6 are typically brand name and therefore higher cost.

If you are on a few prescriptions for minor conditions like high cholesterol and high blood pressure, chances are you won’t see high costs regardless of what plan you choose. These drugs are simply less expensive to the insurance company so there is little to no cost to you. On the other hand, brand name and specialty drugs will be expensive in every plan.

Your Pharmacy

Each Medicare Drug Plan partners with specific pharmacies to give you the best rate possible. Each plan will offer you Preferred Pharmacies, Standard Pharmacies, and Out-Of-Network Pharmacies. Preferred Pharmacies are the ones that have struck a deal with your insurance company, and usually offer the lowest price. Standard Pharmacies are technically still in-network but offer slightly higher prices to members relative to Preferred Pharmacies. Out-of-network pharmacies are not covered by your plan and will see much higher prices compared to their competitors. Talk to your broker to make sure the plan you choose partners with the pharmacy you want to go to.

Your Zip Code

While there are many national level companies for Prescription Drug Plans, they are always administered at a local level. Some states have prescription plans that are statewide and some states force companies to go county by county. And different states and zip codes will have different costs for your specific drugs. Talk to a broker licensed in your state to determine the best course of action, and to see what plans are available to you based on your address.

The Conclusion

There are many variables used to determine what you will pay for prescriptions. There are more complex calculations used to determine what your actual costs will be throughout the year, highlighted in an article here: Drug Cost Calculations. Your licensed broker will help you sift through all these variables to determine what is best for you and your health needs. Schedule an appointment with the brokers at NJ Life and Health today by calling us at 848-226-6897, or scheduling an appointment on our website at

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