How a plan's drug list changes what you pay

If you take prescriptions regularly, the single document that will do most to determine what you spend on a Medicare plan is not the summary of benefits. It is the formulary: the plan's list of covered drugs. A formulary is as much a pricing document as a coverage document, and reading one is a short exercise that tends to be skipped because the file is long and the layout is unwelcoming.

Covered is not one thing

A drug can appear on a formulary and still cost you very different amounts depending on where it sits. Plans generally sort covered drugs into tiers, with the lowest tiers holding preferred generics and the highest holding specialty drugs, and each tier carries its own copayment or coinsurance. The same medication can be a low-tier drug on one plan and a high-tier drug on another, which is the main reason two people in the same town with the same prescription can report wildly different costs.

So the question is never simply whether a drug is covered. It is which tier it is in, what that tier costs under this plan, and whether anything has to happen before the plan will pay.

The restrictions worth looking for

Formularies typically mark certain drugs with requirements that apply before coverage begins. Three come up often enough to recognise on sight:

• —Prior authorisation. The plan has to approve the prescription before it will cover it, usually on the basis of information your prescriber supplies.
• —Step therapy. You may be expected to try a lower-cost alternative first, and to have it not work well enough, before the plan covers the drug your prescriber originally chose.
• —Quantity limits. The plan covers a capped amount over a period, which can matter for dosages that fall outside the standard range.

None of these mean a drug is unavailable. They mean there is a process, and the process takes time that is easier to spend before a refill runs out than after.

Where you fill it also counts

Plans typically contract with pharmacies, and often distinguish between preferred and standard in-network pharmacies, with different cost sharing at each. Mail order may be priced differently again. A plan that looks expensive at the pharmacy two streets away can look reasonable at a preferred pharmacy a little further on, and the formulary document usually will not tell you that on its own — the pharmacy directory will.

Lists change, and not only in January

Formularies are generally set for a plan year, but they are not frozen. A plan may add drugs, move a drug to a different tier, add a restriction or remove a drug during the year, within rules that govern how and when it can do so and what notice it must give. A drug being removed because a generic has become available is a routine event; so is a tier moving in a way that changes a copayment you had budgeted for.

This is why the arrival of plan mail in the middle of a year is worth opening rather than filing. A change to a formulary is not a change to your plan in any obvious sense. Your premium may be identical, your card still works, and what you hand over at the counter is different.

A short way to read a formulary

Write down every prescription you take, with the dose and how often you take it. Then, for each one, find four things in the plan's documents:

• —whether the drug appears on the list at all, under its generic name as well as its brand name
• —which tier it is in, and what that tier costs under this plan
• —whether it is marked for prior authorisation, step therapy or a quantity limit
• —what it costs at the pharmacy you actually use, rather than at a notional in-network one

Doing this for a full prescription list usually takes less time than people expect, and it tends to change the ranking of plans that looked similar on premium alone.

If a drug is not covered

Plans generally have a process for asking them to cover a drug that is not on the list, or to cover it at a lower tier, when your prescriber supports the request on clinical grounds. There is usually also a process for a temporary supply when you are new to a plan and discover mid-prescription that something has changed. Both are formal processes with their own deadlines, described in the plan's own materials, and both work better when started early.

The useful habit is small. Keep your prescription list somewhere you can find it, and treat any notice about a drug list as something to read on the day it arrives. Almost everything that goes wrong with prescription costs under Medicare is a change that was announced and not read in time.