Know Your Plan:
Annual Out-of-Pocket Threshold

To limit enrollees' total out-of-pocket costs for medications, the Medicare drug benefit provides additional help when an enrollee pays more than $3600 out of-pocket. This is called the out-of-pocket threshold. Once an enrollee has spent $3600 out of pocket in a year, the enrollee's copayment will be much lower for the remainder of the year. The $3600 threshold will go up each year to reflect inflation. The enrollee must meet that out-of-pocket amount each year before theenhanced benefits begin.

It is important to understand that not all out-of-pocket costs count towards this threshold. Only costs that are "covered" by your health plan count. Costs that count include:

• Deductibles.
• Costs while in the coverage gap (or "donut hole") period.
• Copays for covered medications. Covered medications are medicines that are on the formulary (in any tier) and that you get from a pharmacy approved by your plan, or via the plan's mail order service.
• Costs for medications that are not normally covered, but which have been covered for you based on an exception or appeal.

Costs that do not count towards the cap include costs for drugs that the plan does not normally cover, such as:

• Over-the-counter medications
• Medicines that are excluded from Medicare coverage by law - such as cosmetic drugs, fertility drugs, or drugs for weigh control
• Medicines that are denied by the plan because they are not on the plan's formulary
• Medicines that are denied by the plan because they are not prior authorized
• Medicines that are covered under Medicare Part A (hospital coverage) or Medicare Part B (outpatient coverage)
• Medicines purchased from an out-of-network pharmacy (unless it is an emergency)

Therefore, if a drug plan denies coverage of your medication, it is important to request a coverage determination, rather than just to pay for it out-of-pocket. If you just pay for it, your payment will not count towards your out-of-pocket threshold. However, if you request coverage through the Medicare appeal process and win, the amount of your copay will count towards your out-of-pocket threshold.