Medicare Glossary

Definitions for common Medicare terms

cost tiers

DEFINITION: Medicare Part D plans typically use a system of cost tiers to rank prescription drugs according to their cost. Out-of-pocket costs for the enrollee are generally higher for higher-tier drugs.

Generic drugs are typically in the lowest (cheapest) tier, while brand-name drugs will be in a higher tier, and specialty drugs will be in the highest tier.

But each insurer designs its own formulary (covered drug list). Plans can have varying amounts of tiers, and the drugs in those tiers will be different from one plan to another.

Instead of having to wade through the formularies of all the Part D plans available in your area, you can use Medicare’s drug finder tool, which allows you to type in your medications and see how each plan will cover them. You’ll need to repeat this process each year, during open enrollment, as the plans can change from year to year.