Just when you thought Medicare couldn’t get any more confusing, you learn a new word: the Part D formulary. So, what exactly is a formulary and why is it so important?
What is a Drug Formulary?
Each Medicare Prescription Drug plan has a list of drugs that it covers. This list is called a formulary.
Within your plan’s formulary, prescription drugs are categorized by tiers. Drugs placed in a lower tier tend to be less costly, while drugs placed in higher tiers are more expensive.
Expert Tip: If your doctor prescribes a brand name drug to you, ask if there is a generic available. It could end up saving you money!
Why is the Formulary Important?
Understanding the basics of your plan’s formulary is important because this list can have a significant impact on the amount you pay for your prescriptions. And many people do not realize that insurance companies change the formulary on an annual basis.
Insurance companies sometimes move drugs on their plan formularies into different tiers from year to year. They also sometimes take drugs off the formulary altogether. This means that if your drugs change tiers, the cost you pay this year for your drugs could be very different next year. What’s more, if any of your drugs are removed from the formulary, you could be required to pay 100 percent of the cost of the drug completely out of pocket. This adds up!
Making Sure You Are Informed About Your Plan’s Drug Formulary
Insurance companies typically make changes to their plans’ formularies during Medicare’s open enrollment period, also referred to as the Annual Enrollment Period or AEP. This time frame occurs each year between Oct. 15 and Dec. 7.
The government requires that insurance companies notify enrollees about changes by sending out a document no later than Sept. 30 called the Annual Notice of Change (ANOC). This document is over 100 pages long and explains all the changes to your plan’s benefits, costs and formulary.
When you receive this document, it is very important that you review it carefully to ensure that you know what changes are being made to your coverage. Based on this information, you can decide if your plan will still meet your health needs and budget in the coming year or if you need to begin looking at different options.
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