What are the 4 stages to Medicare Prescription Drug Plans?

If you are being asked to pay a copayment for a Medication and it seems too expensive, there are a few things to be aware of and a couple tips you should be aware of for managing your out-of-pocket costs.

First, remember there are 4 stages in Medicare Prescription Drug Plans. These stages reset every January 1st, and you will progress from one stage to the next based upon how much you pay and how fast the retail costs for your medication add up.

  1. Stage 1 is a deductible, if you haven’t met the deductible yet that is likely the reason for this high copayment. You are responsible for paying the full retail cost of your medications until you have met your deductible. Almost all plans have a deductible of approximately $450 per year. Note that most plans waive the deductible on low-cost generics.
  2. Once you have met your deductible you will enter Stage 2, also known as the initial coverage level. Your copays are now based upon tier and are generally a flat amount. 
  3. Stage 3 is the “donut hole” or coverage gap and you are responsible for 25% of the full retail cost of the medication. You enter stage 3 when the full retail costs (not necessarily your out-of-pocket costs) for all your medications add up to equal approximately $4,000 during the calendar year.
  4. Stage 4 is the catastrophic coverage stage and your medications will be approximately 5% of the full retail cost. Very few people reach this stage.

In summary, it is normal for your copayments to vary throughout the year.

A few tips to help you learn how to manage your costs:

  • You should try to use generics on medicare as much as possible. Talk to your doctor about what Generic options are available. 
  • You can use this portal to enter in your Medications to see what the estimated cost will be under your plan at your preferred pharmacy (Save your username and password).
  • You do not have to run the medication through your prescription drug plan. You can ask for a cash discount, or use a GoodRx coupon. (GoodRx is very popular).
  • You can inquire with the drug manufacturer or certain foundations if there are programs available for certain medications. 
  • If you are at the end of the year and recently met your deductible, consider getting a 90 day fill late in December when your costs will be cheaper - otherwise you’ll have to turn around and re-meet your deductible in January.