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What counts for my "out-of-pocket" costs and catastrophic coverage?

In the Medicare Prescription Drug Coverage, you and the plan you join share the cost of drugs. The money that you spend (called your out-of-pocket costs) determines if and when the catastrophic coverage begins. In 2009 catastrophic coverage starts when you have paid $4,350 out of your pocket (about $6,154 in total drug costs).

Medicare divides drug costs into two different groups:

1. Your “true” out-of-pocket costs - these are drug costs that count toward the start of your catastrophic coverage.
2. All other drugs you bought that don’t count toward your catastrophic coverage.

What counts as my “true” out-of-pocket costs?

• Money that you paid for covered drugs. This includes your co-pays and drugs you paid for to meet your deductible.
• Others can help you pay all or part of your costs:

• Another person.
• A registered charity.
• A State Pharmacy Assistance Program.
• Drug manufacturer patient assistance program - check with each company's program to find out if costs will count towards your "true" out-of-pocket costs.

Costs that do not count toward your share of the costs and catastrophic coverage:

• The premium for your drug plans (Medicare Prescription Drug Plan or Medicare Advantage Prescription Drug plan).
• Drugs you bought that are not on your plan’s drug list (formulary).  Note that if you and your doctor get your plan to approve a drug not on the plan’s drug list, then the costs for that drug do count toward your share of the costs and catastrophic coverage.
• Costs that third parties—such as employers and union insurance plans – paid for you.
• Drugs you bought that Medicare does not cover (See Drugs Excluded by Law for list)
• Drugs you bought from a pharmacy that was not in your plan’s network.
• Over-the-counter drugs.

Your drug plan will keep track of your out-of-pocket drug costs. They will send you a report each month you buy drugs.

NEXT: How can I lower my costs in the coverage gap?