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What Are Formularies in Medicare?

Copyright © 2014 AARP. All rights reserved.

Formulary is jargon that becomes familiar when you’re in Part D because it directly affects what you pay. A formulary is simply the list of drugs that each Part D plan decides to cover. (No national formulary exists.) Here’s why it’s important that your drugs are included on your plan’s formulary:

  • You usually have to pay the whole tab for drugs that aren’t covered. Your plan pays its share of the cost during the initial and catastrophic coverage phases (Phases 1 and 4). But for any drug the plan doesn’t cover, you pay full price in all phases of coverage unless you win an exception from the plan.

    The difference in your out-of-pocket expenses between a covered and uncovered drug can be hundreds of dollars a month.

  • You don’t get doughnut hole credit for uncovered drugs. If you fall into the doughnut hole (Phase 3), the cost of any drugs not covered by your plan doesn’t count toward the out-of-pocket limit that gets you out of the gap and triggers low-cost catastrophic coverage.

  • You’re more likely to properly fill and take your medicines. You need the meds you’re prescribed for the sake of your health. If you get coverage for them and don’t have to pay full price, you’re much more likely to fill all your prescriptions and not skip doses.

    Examples of costs through four phases of coverage.
    Examples of costs through four phases of coverage.

No Part D plan covers all prescription drugs, and the number covered varies greatly among plans. In 2013, the percentage of drugs that are covered ranges from 53 to 76 percent among the ten Part D plans with the most people enrolled, according to an analysis by the health research group Avalere Health.

So the goal is to choose a plan that covers all, or at least most, of the specific drugs you take.

Laying out the drugs Part D plans must cover

Although Medicare law doesn’t require Part D plans to cover every drug, it does insist that each plan covers at least two drugs in each class of medications. A class means all the similar drugs that are used to treat the same medical condition. Many plans cover more than two in each class. But every plan must cover “all or substantially all” drugs in each of the following six classes:

  • Anticancer drugs (used to halt or slow the growth of cancers)

  • Anticonvulsants (used mainly to prevent epileptic seizures)

  • Antidepressants (used to counteract depression and anxiety disorders)

  • Antipsychotics (used to treat mental illnesses such as schizophrenia, mania, bipolar disorder, and other delusional conditions)

  • HIV/AIDS drugs (used to block or slow HIV infection and treat symptoms and side effects)

  • Immunosuppressants (used to prevent rejection of transplanted organs and tissues and treat immune system disorders and some inflammatory diseases)

Medicare requires every Part D plan to cover pretty much all drugs in these categories because of the clinical problems that can occur when patients abruptly stop taking such medications or switch to others.

Recognizing the drugs Medicare doesn’t pay for

By law, Medicare doesn’t pay for certain kinds of drugs. Part D plans aren’t prohibited from covering them; Medicare just doesn’t reimburse their cost. So although a few plans may cover some of these drugs, most plans don’t cover any. The types of excluded drugs are

  • Medicines sold over the counter (not needing a doctor’s prescription)

  • Drugs used for anorexia, weight loss, or weight gain

  • Drugs used for cosmetic reasons and hair growth

  • Drugs used to promote fertility

  • Drugs used to treat sexual or erectile dysfunction

  • Medicines used to treat cough or cold symptoms

  • Prescription vitamins and mineral products

Sometimes Medicare will pay for medications in these categories if they’re used for a “medically acceptable” purpose — for example, cough medicines when prescribed by a doctor to alleviate medical conditions such as asthma, drugs for impotency when prescribed to treat different medical conditions that affect veins and arteries, or antismoking drugs if prescribed by a doctor rather than bought over the counter.

Until 2013, Medicare also excluded barbiturates (used for anxiety and seizures) and benzodiazepines (used for anxiety and sleeping problems) because these drugs are often abused. But the ban has now been lifted wholly on benzodiazepines. And Part D coverage for barbiturates is allowed when prescribed to treat epilepsy, cancer, or chronic mental disorders.

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