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 is called your out-of-pocket costs. That determines if and when the catastrophic coverage begins. In 2014, catastrophic coverage starts when you have paid $4,440, about $6455.00 in total drug costs.
Medicare divides drug costs into two different groups:
- Your “true” out-of-pocket costs – these are drug costs that count toward the start of your catastrophic coverage. In 2014, this includes the 50% discount amount the drug manufacturer pays for brand name drugs while you are in the coverage gap.
- All other drugs you bought that do not count toward your catastrophic coverage.
What counts as my “true” out-of-pocket costs?
- Money that you paid for covered drugs. This includes your copays and drugs you paid for to meet your deductible. It also includes most of the amount (the 50% discount) that the drug manufacturer pays for brand name drugs while you are in the coverage gap.
- 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.
- Drugs that Indian Health Services or AIDS Assistance Programs provide.
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.
- The discounts during the coverage gap that are paid by the plan, meaning the 21% discount on generics and the 2.5% discount on brand-name drugs.
- 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.