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Clients often ask us for help with Medicare planning. The rules can be confusing, and making assumptions can be costly. Cardan Capital Partners Co-Founding Partner Marti Awad recently teamed with Carol Janz Booth of Group Insurance Analysts Inc., to share some tips to help you make proactive choices when it comes to your Medicare coverage.

One of the biggest problems in healthcare today is the rising cost of prescription drugs with no end in sight. Brand-name drugs have seen staggering increases, prompting many people to buy less expensive drugs from Canada, try other drastic measures to procure their medications, or skip taking them entirely.  Also, a common mistake Medicare recipients make is letting their Part D plans go into “auto-pilot”- keeping the same plan year after year which can be costly.

Here are some ideas to help you:

  • evaluate your current Medicare Part D plan, also known as the prescription drug benefit using the Plan Finder Tool on medicare.gov;
  • select a plan, enroll in a plan, or compare your current plan to others using the Plan Finder Tool on medicare.gov;
  • control costs by looking at drug prices using the Plan Finder Tool on medicare.gov; and
  • switch to a lower-cost prescription drug plan during the annual Medicare Annual Enrollment period from Oct. 15-Dec. 7;
  • 2022 Part D plans should be uploaded on the Plan Finder Tool on Oct 1, 2021.

Understanding how your drug plan works includes:

The plan’s formulary, or its list of approved drugs

Ms. Janz Booth is a Licensed Colorado Health Broker, Senior Health Plan Specialist and Certified Gerontologist

The list of drugs covered by a Part D plan is called a “Summary of Benefits and Formulary.” Medicare sets standards for the types of drugs Part D plans must cover. However, each plan chooses the specific brand names and generic drugs on its formulary. Plans may add or remove specific drugs from their drug lists from year to year — and they typically do. Make sure the medications you take are on the formulary of the plan you have or the plan you want. This can be a costly mistake if you allow the plan to go into “auto-pilot” renewal.  You can find the formulary online, in the Summary of Benefits or from the plan provider when enrolling. Don’t forget to check with your doctor if you are changing medications to make sure those medications are also on the plan’s formulary.

Tip :The Medicare Plan Finder Tool allows you to access and store your drug lists.

Formulary tier levels, or the price of a drug

Part D plans also differ in how they place drugs into different tiers on their formulary. Each tier costs a different amount, generally requiring consumers to pay either a dollar copayment or a percentage amount of the cost. Typically, the lower the tier, the lower the cost. Plans may charge a deductible for some tiers and not for others, or the deductible amount may differ based on the tier. A simple and general way to think of the tiers:

  • Tier 1: Preferred generic, lowest copay
  • Tier 2: Generic, medium copay
  • Tier 3: Preferred brand, higher copay, often newly released to the market
  • Tier 4: Non-preferred, higher priced brand name and generic drugs not in a preferred tier
  • Tier 5: Specialty, highest copay, highest cost prescription drugs used to treat complex medical conditions. Can be generic or brand name

Tip: You and your doctor may file a “tiering exception” to request a lower cost-sharing amount. Each plan has steps to follow when submitting a tiering exception.

Cost differences among preferred network, standard network and out-of-network pharmacies

Marti Awad, CFA, CFP®, JD, LLM in taxation and Founding Partner of Cardan Capital Partners

Marti Awad, CFA, CFP®, JD, LLM in Taxation and Founding Partner of Cardan Capital Partners

Some plans have a network of pharmacies from which to choose. Others offer nationwide coverage through networks of national chains; regional and local chains; and even independent, neighborhood pharmacies. Network pharmacies have preferred cost-sharing. You may pay less if you use these pharmacies. Search for a network pharmacy using the plan’s online directory. If you use an out-of-network pharmacy, the plan may not pay for the drugs, or you may pay more than when using a network pharmacy.

Prior authorization

Your Part D plan may need more information from your doctor before the medication is approved to make certain the drug is being used appropriately for a medical condition covered by Medicare.

Note: In response to Medicare and COVID-19 response, prescription drug plans may waive or relax prior authorization requirements.

Quantity limits

For health and safety reasons, your plan may place quantity limits on certain drugs, such as six pills every 30 days or 10 pills every two weeks. If your doctor prescribes more than the limit, you and your doctor may request an exception to cover the additional quantity. If your plan denies the request, you can appeal the decision.

Step therapy

With step therapy, you first must try a lower-cost drug that has been shown to be effective to treat the condition before the plan will cover a more expensive drug. If the lower cost drug doesn’t work, you and your doctor may request approval from the plan to “step” to the next level drug for treatment.

Drug coverage stages and how they affect costs

After the plan negotiates the prices with the drug manufacturers and pharmacies, the amount you pay for your drugs depends on the stages you go through during the year. The coverage cycle resets at the start of the plan year, which is usually Jan. 1.

Part D has four coverage stages:

  • Stage 1: The Annual deductible
    You pay for your drugs until you reach the deductible amount, if any, set by your plan. In 2022, the maximum deductible set by the Centers for Medicare and Medicaid Services (CMS) is $480. If your plan doesn’t have a deductible, your coverage starts with the first prescription you fill.
  • Stage 2: Initial coverage
    After you meet your Part D deductible, if any, you enter the initial coverage period. During this phase, you pay either a copay (flat fee) or coinsurance (percentage of cost) for your covered medications.
  • Stage 3: Coverage gap 
    In 2022, you will enter the Coverage Gap Phase once you and your plan have spent $4,430 on covered prescriptions. Before passage of the Affordable Care Act (ACA), you were responsible for the entire cost of your prescriptions while in the Coverage Gap (formerly known as the Donut Hole) up to a yearly limit. However, since 2011, the Coverage Gap gradually has shrunk with increasingly larger discounts for generic and brand-name drugs. From 2020 forward, your generic and brand-name drug purchases have a 75% discount paid for by insurers and drug manufacturers. This means you pay the remaining 25% of retail cost. You still will pay for your prescriptions — but with a 75% discount.
  • Stage 4: Catastrophic coverage
    This is the final and fourth stage of Part D coverage. It begins when you have reached your drug plan’s out-of-pocket yearly spending limit, which is often referred to as “True Out Of Pocket (TrOOP),” and are outside the Coverage Gap. These thresholds change every year. It is projected that for 2022, the TrOOP will be $7,050. Once this out-of-pocket annual limit is reached, you pay only the greater of 5% or a $3.95 copay for generics and a $9.85 copay for brand-name drugs. To calculate your TrOOP, a full 95% of the retail cost for brand-name drugs is used even though you only pay 25%. This helps you reach your catastrophic coverage stage faster. Costs that do not help you reach catastrophic coverage include monthly premiums, the cost of non-covered drugs, the cost of covered drugs from pharmacies outside your plan’s network, and the generic drug discount.

Tip – Each drug plan provides a personal prescription benefits statement either by email or mail.  These monthly summaries help you determine which drug payment stage you are in and can be most helpful in tracking your out-of-pocket costs and total drug costs. These statements will also be valuable in comparing your current plan to your next year’s plan.

** NEW in 2021 *** Part D Senior Savings Model limits insulin costs to $35 a month. Part D participating plans would allow Medicare recipients’ out-of-pocket costs for insulin to be capped in order to curb costs.  This program will continue in 2022 to give access to affordable insulin.  Go to Medicare.gov and enter “senior savings model” in the search bar for more information.

Mail-order, or home delivery

You may realize savings and convenience when you order three-month supplies of your medications through a mail -order pharmacy, which delivers drugs directly to you. All Part D plans and Medicare Advantage plans have access to mail-order prescription services. The easiest way to order them is online or over the phone through your Part D plan. Remember to place order at least two weeks in advance to avoid running out of your prescription.

Late Enrollment Penalty (LEP)

If you enroll outside of set enrollment periods, you will pay an additional amount added to your Part D monthly premium.  You may owe the penalty if, for any continuous period of 63 days or more after your Initial Enrollment Period is over, you have gone without:

  • A Medicare Prescription Drug Plan (Part D),
  • A Medicare Advantage Plan (Part C) with drug coverage, or
  • Creditable prescription drug coverage. This is when the coverage is expected to pay on average as much as the standard Medicare prescription drug coverage.

The cost of the late enrollment penalty depends on how long you have gone without Part D or creditable drug coverage. Medicare calculates the penalty by multiplying the number of uncovered months by 1% of the “national base beneficiary premium,” which is $33.06 in 2021 (the 2022 figure is not available yet). This penalty then is added to your monthly Part D plan premium for as long as you have coverage. The plan provider will notify you about the penalty after enrolling. If you dispute the penalty amount, you may request a “reconsideration,” or appeal, through Medicare.

In conclusion, to maximize your Part D prescription plan and get the most bang for your buck it is important to educate yourself on the working parts and rules of a Part D plan and to re-examine your coverage each year during fall Annual Enrollment for Part D. A deeper-level comprehension of how your Part D plan works will allow you to anticipate your future needs and make appropriate changes.



    • Centers for Medicare and Medicaid Services
    • Official U.S. government Medicare: Visit Medicare.gov, or call 1-800-MEDICARE (800-633-4227)
    • Medicare & You (.pdf): This handbook can be accessed from Medicare.gov and is published annually by the Centers for Medicare and Medicaid Services.
    • Social Security Administration: 800-772-1213 www.ssa.gov
    • State Health Insurance Assistance Program: The program’s website, shiptacenter.org, features state-specific information. Colorado residents can find more information from the Colorado Department of Regulatory Agencies’ website or call 1-866-696-7213.
    • Medicare Plan Finder lists the plans available in your area. It also details the premiums and personalized information about the out-of-pockets costs you will pay for your drugs.

Medicare Brokers: It is helpful to know about these professionals. Medicare insurance brokers assist clients with Fall Open Enrollment by analyzing current Part D (and Part C) plans and needs, and they make recommendations at no charge. They offer year-round client service and provide back-end policy support — such as addressing billing errors or helping with appeals if a claim is denied — once a client’s coverage begins. Medicare Insurance brokers are independent agents giving unbiased opinions and are appointed with different insurance companies. Independent Medicare brokers are paid by the insurance companies, not by a client. The monthly premium you pay for your policy includes a commission built in for your Medicare insurance broker. The price you pay for your insurance is exactly the same whether you buy it direct or through a Medicare insurance broker.


The content contained in this article is meant for educational purposes and is not an endorsement of Group Insurance Analysts Inc. Information presented is not meant to be a complete discussion of Medicare, Medicare Part D, nor plan-specific benefits. All expressions of opinion are as of its publishing date and are subject to change.

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