7 Important Medicare Prescription Drug Coverage Rules You Should Understand

Prescription Drug TiersFor certain prescription drugs, special guidelines may be in place for how and when the plan covers them. A team of doctors and pharmacists at the insurance company develop these guidelines to help beneficiaries use drugs in the most effective ways. These special rules also help control overall drug costs, which keeps your drug coverage and plan premiums more affordable.

Call your Medicare drug plan to find out the specific drug coverage rules for your plan. In general, Medicare drug plans may have these coverage rules:

1. Drug List/Formulary

A formulary is a list of drugs which include both generic and brand name medicine that a plan covers. Plans do not have to cover every drug in their formulary, but they must have at least 2 in every drug class and category. It is important to make sure your drugs are on the plan’s formulary so that you can be sure it is covered. Your independent broker can do that for you.

The formulary nearly always is divided into tiers or levels of coverage based on the type or usage of the medication. Each tier will have a defined out-of-pocket cost that the patient must pay before receiving the drug. Many plans determine what the patient costs will be by putting drugs into four, five, or even six different tiers. These tiers are determined by:

  • Cost of the drug
  • Cost of the drug and how it compares to other drugs for the same treatment
  • Drug availability
  • Clinical effectiveness and connection to standard of care
  • Other cost factors, including delivery and storage

The tiers typically, but not always have the following classifications:

  • Tier 1 – Preferred Generic drugs offer the lowest co-payment and are often generic version of brand name drugs
  • Tier 2 – Non-Preferred Generic drugs still offer a low co-payment. This tier consists of mostly non-preferred generic drugs, but also a few brand name drugs that are most affordable.
  • Tier 3 – Preferred Brand drugs have a higher co-payment. Often, they are brand-name drugs that have a generic version available. Some costly generic drugs may be placed on this tier as well.
  • Tier 4 – Non-Preferred drugs are both brand and generic drugs on the formulary but not preferred. The co-pays are higher for drugs in this tier. If you receive a formulary exception for a non-covered drug, this is the tier in which it is usually placed for your co-payment responsibility.
  • Tier 5 – Specialty drugs are typically used to cover serious illness. Generally, they come with a co-insurance percentage rather than a fixed-dollar co-pay. These are the most costly drugs.
  • Tier 6 – Carve-out drugs are placed on this tier to offer a reduced co-pay. For example, some plans place either the most commonly-used drugs, or specified-use drugs (i.e. diabetes medications) in this tier to “carve out” a special lowered co-payment.

If your medication is not covered, double check with your doctor to see if there is another treatment option available to you. You can request an exception if:

  • The drug you need is not on the formulary and it is the best treatment for you
  • The drug needs pre-authorization, has limits, or requires step-therapy (see below)
  • The drug is covered but you would like it to be covered on a lower tier

2. Prior Authorization

Your plan may require you or your physician to get prior authorization for certain drugs. If you don’t get prior approval, your plan may not cover the drug. You or your prescriber must show the plan that you meet certain criteria for you to have that particular drug. Plans also do this to be sure these drugs are used correctly. Contact your plan about its prior authorization requirements, and talk with your prescriber.

Plans may also use prior authorization when they cover a medication for certain medical conditions, but not all medical conditions for which a drug is approved. When this occurs, plans will have an alternative medication on their formulary (drug list) for that medical condition.

However, if your prescriber believes it’s medically necessary for you to be on that particular drug even though you don’t meet the prior authorization criteria, you or your prescriber can contact the plan to request an exception. Your prescriber must give a statement supporting the request. If the request is approved, the plan will cover the particular drug, even if you didn’t get prior authorization for the drug.

3. Quantity Limits

For safety and cost reasons, plans may limit the amount of certain prescription drugs they cover over a specified period of time. For example, most people prescribed heartburn medication take 1 tablet per day for 4 weeks. Therefore, a plan may cover only an initial 30-day supply of the heartburn medication.

If your prescriber believes that, because of your medical condition, a quantity limit isn’t medically appropriate (for example, your doctor believes you need a higher dosage of 2 tablets per day), you or your prescriber can contact the plan to ask for an exception.

4. Step Therapy

In some cases, your plan may require you to first try certain drugs to treat your medical condition before they will cover another drug for that condition. Step therapy is a type of prior authorization. In most cases requiring step therapy, you must first try a specified, less expensive drug on the plan’s formulary that is proven effective for most people with your condition before you can move up a “step” to a more expensive drug. For instance, some plans may require you first try a generic drug (if available), then a less expensive brand-name drug on their drug list before you can get a similar, more expensive, brand-name drug covered.

However, if you have tried the less-expensive drugs before, or your prescriber believes that because of your medical condition it’s medically necessary for you to be on a more expensive step therapy drug without trying the less expensive drug first, you or your prescriber can contact the plan to request an exception.

In addition, your prescriber can request an exception if he or she believes you’ll have adverse health effects if you take the less expensive drug, or if your prescriber believes the less expensive drug would be less effective. Your prescriber must give a statement supporting the request. If the request is approved, the plan will cover the more expensive drug, even if you didn’t try the less expensive drug first. Keep in mind the more expensive drug likely will be on a higher tier in the formulary, so it will cost you a higher co-pay or co-insurance.

Example of step therapy

Step 1—Dr. Jones wants to prescribe an ACE inhibitor to treat Mr. Rodigo’s heart failure. There is more than one type of ACE inhibitor. Some of the drugs Dr. Jones considers prescribing are higher-cost ACE inhibitors covered by Mr. Rodigo’s Medicare drug plan. The plan rules require Mr. Rodigo to use a lower-cost ACE inhibitor first. For most people, the lower-cost drug works as well as the higher-cost drug.

Step 2—If Mr. Rodigo takes the lower-cost drug but has side effects or limited improvement, Dr. Jones can prescribe the higher-cost ACE inhibitor.

5. Part D Vaccine Coverage

Except for vaccines covered under Medicare Part B (Medical Insurance) , Medicare drug plans must cover all commercially available vaccines (like the shingles vaccine) when medically necessary to prevent illness.

6. Drugs You Get in Hospital Outpatient Settings

In most cases, the prescription drugs you get in a hospital outpatient setting , like an emergency department or during observation services, are NOT covered Medicare Part B (Medical Insurance). These are sometimes called “self-administered drugs” that you would normally take on your own. Your Medicare drug plan may cover these drugs under certain circumstances.

You will likely need to pay out-of-pocket for these drugs and submit a claim to your drug plan for a refund. Or, if you get a bill for self-administered drugs you got in a doctor’s office, call your Medicare drug plan for more information.

If you or your prescriber believe that one of these coverage rules should be waived, you can ask your plan for an exception.

7. Opioid Pain Medication Safety Checks

When you fill a prescription at the pharmacy, Medicare drug plans and pharmacists routinely check to make sure the prescription is correct, that there are no interactions, and that the medication is appropriate for you. They also conduct safety reviews to monitor the safe use of opioids and other frequently abused medications. These reviews are especially important if you have more than one doctor who prescribes these drugs. In some cases, the Medicare drug plan or pharmacist may need to first talk to your doctor before the prescription can be filled.

  • Your drug plan or pharmacist may do a safety review when you fill a prescription if you:
  • Take potentially unsafe opioid amounts as determined by the drug plan or pharmacist.
  • Take opioids with benzodiazepines like Xanax®, Valium®, and Klonopin®.
  • Are new to using opioids – you may be limited to an initial 7-day supply or less, to decrease the likelihood of addiction or long-term use.

If your pharmacy cannot fill your prescription as written, the pharmacist will give you a notice explaining how you or your doctor can call or write to your plan to ask for a coverage decision. If your health requires it, you can ask the plan for a fast coverage decision. You may also ask your plan for an exception to its rules before you go to the pharmacy, so you’ll know if your plan will cover the medication.

For certain drugs, Medicare drug plans might perform additional safety checks, and will send your pharmacy an alert for review before your prescription is filled. Safety alerts may cover situations like:

  • Possible unsafe amounts of opioids. Your pharmacist or Medicare drug plan may need to review your prescription with your doctor to make sure the medications are safe.
  • First prescription fills for opioids. You may be limited to a 7-day supply or less if you haven’t recently taken opioids.
  • Use of opioids and benzodiazepines at the same time.

If your prescription cannot be filled as written, including the full amount on the prescription, the pharmacist will give you a notice explaining how you or your doctor can contact the plan to ask for a coverage determination. You may also ask your plan for an exception to its rules before you go to the pharmacy to buy the medication, so that your prescription is covered.

Pain Medication Management Programs

Some Medicare drug plans have a drug management program in place to help you use these opioids and benzodiazepines safely. If you get opioids from multiple doctors or pharmacies, your plan will contact the doctors who prescribed the drugs to make sure they are medically necessary and that you are using them appropriately.

If your Medicare drug plan decides your use of prescription opioids and benzodiazepines may not be safe, the plan will send you a letter in advance. This letter will tell you if the plan will limit coverage of these drugs for you, or if you must get the prescriptions for these drugs only from a doctor or pharmacy that you select.

Before your Medicare drug plan places you in its Drug Management Program, it will notify you by letter, and you will be able to tell the plan which doctors or pharmacies you prefer to use. You and your doctor can appeal if you disagree with your plan’s decision or think the plan made a mistake.

Note that the opioid safety reviews at the pharmacy and the Drug Management Programs generally don’t apply to you if you have cancer, get palliative or end-of-life care, are in hospice, or if you reside in a long-term care facility.

If You are Prescribed Opioids

  • Talk with your doctor about your dosage and the length of time you must take them. You and your doctor may decide later you don’t need to take all of your prescription.
  • Talk with your doctor about other options that Medicare covers to treat your pain, like non-opioid medications and devices, physical therapy, individual and group therapy, behavioral health integration services, and more. There also may be other pain treatment options available that Medicare doesn’t cover.
  • Never take opioids in greater amounts or more often than prescribed.
  • Some people with certain medical conditions and others with risk factors should also talk with their doctor about having naloxone at home. Naloxone is a drug prescribed as a safety measure that can be given by someone else to reverse the effects of an opioid overdose.
  • Safely dispose of unused prescription opioids through your community drug take-back program or your pharmacy mail-back program.
  • What works best is different for each patient. Treatment decisions to start, stop or reduce prescription opioids are individualized and should be made by you and your doctor.
  • Visit the Centers for Disease Control and Prevention for more information on safe and effective pain management.

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