People often focus on the monthly premium when choosing a Medicare plan. It is a natural instinct — a lower premium sounds like saving money. But the premium is only part of what you will actually spend. The other part is at the pharmacy. And that number can vary significantly from plan to plan, for the exact same medications.
What a Formulary Is
Every Part D drug plan — whether standalone or bundled into a Medicare Advantage plan — maintains a formulary. A formulary is a list of the drugs the plan covers, organized into tiers.
| Tier | Drug Type | Cost to You |
|---|---|---|
| Tier 1 | Generic drugs | Lowest cost-sharing |
| Tier 2 | Preferred brand-name drugs | Moderate cost-sharing |
| Tier 3 | Non-preferred brand-name drugs | Higher cost-sharing |
| Tier 4+ | Specialty drugs | Highest cost-sharing |
The tier a drug sits on determines what you pay when you pick it up at the pharmacy. A medication on Tier 1 at Plan A might be on Tier 3 at Plan B — meaning you could pay three times as much for the exact same drug, simply because of which plan you chose. Plans are not required to cover every drug. Some medications are not on a plan's formulary at all, which means you would pay the full cost out of pocket.
The Same Drug, Very Different Costs
Here is a practical illustration. Imagine you take a brand-name blood pressure medication and a cholesterol drug every month. Plan A places the blood pressure medication on Tier 2 and the cholesterol drug on Tier 1. Plan B places the blood pressure medication on Tier 3. Your monthly copay difference for that one medication alone could be $30 to $60 — adding up to $360 to $720 over a year.
Multiply that across multiple medications and the plan with the slightly higher monthly premium may actually cost you less overall. This is why looking at premiums alone is not enough. The right comparison is total estimated annual cost: premiums plus your estimated drug costs under each plan.
Formularies Change Every Year
Part D plans update their formularies annually. A drug that was on Tier 1 this year may move to Tier 2 or Tier 3 next year. A medication that was covered may be removed entirely from the formulary. Plans are required to notify you when significant changes happen, but these notices can be easy to miss.
This is one reason an annual plan review — ideally before October 15 each year — is worth your time. The plan that worked well for you this year may not be the right fit next year.
Formularies can also change mid-year. If your drug is removed or moved to a higher tier during the year, you may be able to request a formulary exception or use a Special Enrollment Period. Ask your plan or a licensed agent if this happens to you.
What to Bring to a Plan Review
When you sit down with an advisor — or use Medicare's online plan comparison tool at medicare.gov/plan-compare — have the following ready:
- The name of each medication you take
- The dose
- How often you take it (daily, as needed, etc.)
- Your preferred pharmacy
With that list, a complete drug-by-drug cost comparison across available plans is possible. You can see estimated annual drug costs for each plan — not just the monthly premium — and make a choice based on your actual situation.
A Word About Specialty Drugs
If you take a high-cost specialty medication — for conditions like rheumatoid arthritis, cancer, multiple sclerosis, or HIV — plan selection becomes especially important. Specialty drug costs can run into hundreds or thousands of dollars per month at higher tiers. Medicare now limits out-of-pocket spending on covered Part D drugs; once you reach that threshold, your costs drop significantly for the rest of the year. But which plan gets you there with the least spending depends on how each plan prices your specific medications.
Cesar & Associates is an independent insurance agency and is not connected with or endorsed by the U.S. government or the federal Medicare program. We do not offer every plan available in your area. Plan availability, costs, and benefits vary by county, your doctors, and your prescriptions. Please review your options with a licensed agent.