Keeping Track of Your Out-of-Pocket Drug Expenses
It’s likely you’ve heard the term “out of pocket,” which refers to the Medicare expenses that aren’t reimbursed by insurance. A less familiar term, but one that is extremely important to Medicare Part D prescription drug plan members who enter the Coverage Gap, is “true out-of-pocket” or “TrOOP” costs. Your Medicare TrOOP expenses determine when you’ll leave the Coverage Gap, which is the third stage of the standard Medicare Part D benefit, and when you’ll enter Catastrophic Coverage, the fourth and final stage of the benefit. To better understand these coverage stages, please watch this video.
Most Medicare Part D members don’t reach the Coverage Gap or Catastrophic stages of a plan. However, if you take multiple drugs, including brand-name drugs, chances are you will.
In the standard Medicare Part D plan during the Coverage Gap stage, you will pay the most for the medications you take. You will leave the Coverage Gap stage when you exceed a year-to-date out-of-pocket amount set by Medicare annually. In 2017, that amount will be $4,950. Your Medicare TrOOP costs consist of the expenses that determine when you will begin the Catastrophic Coverage stage of your Medicare Part D plan. So it’s important to know what is and what is not counted toward Medicare TrOOP costs.
The expenses that count toward Medicare TrOOP costs include:
- The annual deductible, if the plan has one, when you will pay 100% of the cost for your medications until you meet that amount. For example, if the deductible is $300, you will need to pay the full cost of your medications until you meet that $300 amount.
- The copayments or coinsurance that you pay for your medications in the Initial Coverage stage after you meet any deductible amount.
- Any payments you make for your brand-name drugs during the Coverage Gap. In 2017, you’ll pay 40% of the cost of a covered brand-name drug, and that amount will count toward Medicare TrOOP costs. The drug’s manufacturer will offer a discount, paying 50% of the drug’s cost. This amount also is added to your Medicare TrOOP costs as though you had paid it. That means 90% of the costs of your brand drugs will count toward your Medicare TrOOP balance.
- The portion you pay for generic drugs in the Coverage Gap, since there are no drug manufacturer discounts for generic drugs. In 2017, you are responsible for 51% of the cost of a generic drug in the Coverage Gap stage, so that amount will apply to Medicare TrOOP costs.
- Any payments for drugs that are made from your Medical Savings Account (MSA), Health Savings Account (HSA) or Flexible Spending Account (FSA).
- Payments made on your behalf by family members and friends.
- Payments from Medicare’s Extra Help program.
- Payments from the Indian Health Service, Aids Drug Assistance Programs, State Pharmaceutical Assistance Programs, and most charities (if they are not controlled by you, a former employer/union, or a drug manufacturer’s Patient Assistance Program operating outside Part D).
Payments that do not count toward Medicare TrOOP costs include:
- The monthly Medicare Part D plan premium.
- Prescription drugs that are not on your plan’s formulary (the list of drugs covered by your plan).
- The amount the Part D plan pays for your covered drugs in the Initial Coverage stage.
- Prescription drugs purchased outside the U.S. and its territories.
- Drugs that may be covered by your Part D plan but are excluded by law and on the Medicare Part D excluded drug list.
- Over-the-counter drugs or vitamins (even if they are required by your plan as part of Step Therapy).
- Payments by group health plans, government-funded health programs like Medicaid, TRICARE, workers’ compensation, Department of Veterans’ Affairs, and so forth.
- Other types of insurance.
It’s also important to know that if you switch Part D plans anytime during the year, your Medicare TrOOP costs will be transferred to your new plan.
If these Medicare TrOOP rules seem a bit overwhelming, don’t worry. Your Part D plan provides an Explanation of Benefits (EOB) for each month that your benefit has been used. In addition to other important information, the EOB includes the payments counted toward your Medicare TrOOP expenses to date. This is an easy way for you to keep track of these costs.