Why Networks and Drug Formularies in Medicare Plans are Important

Why do I Need to Know Which Drugs are Preferred in my Insurance Formulary or Which Physicians are In Network?

We ask what drug formularies and preferred providers are and why you need to consider them when choosing a Medicare plan or any health insurance policy.

Every insurance plan has a list of which drugs it will pay for and what it will pay for them. This list is called a formulary. Most people, especially those managing chronic conditions, have certain medications they need.

Insurance plans also have lists of health care providers who are “preferred” by the plans, which is another way of saying they accept that particular insurance plan.

When choosing drug coverage, it is critical to pay the most reasonable amount for the medications you need and doctors you see. This is why you need to know which drugs are on the formularies and which health care providers participate in any health insurance you think of buying.

How do Formularies Work?

Insurance companies negotiate with Pharmacy distributors to buy various medications for the best possible cost. Once they know what the different medications cost, they divide them by tiers or cost levels.

Common generic drugs are usually in the least expensive tier, tier 1. Drugs in this classification are usually classified as “preferred” and will cost you less than drugs in higher tiers.

Depending on your prescription drug plan, you may have any number of tiers in your formulary; four or five tiers are common. The most expensive one is a “specialty” tier for high-cost prescriptions which might require special handling or being made by a specially trained compounding pharmacist.

Formularies may change during the year. Some drugs may be excluded.

How Can I Choose an Insurance Plan?

One of the most efficient ways of choosing a drug plan is to go to the Plan Finder on Medicare.Gov.[1] You will need to enter your personal information and a list of your medications in order to see what your prescription medication costs would be under different plans.

You will need to think about out-of-pocket spending limits and coverage in and out of networks in addition to prescription coverage. If you have specialized medical needs like diabetic, infusion, or ostomy supplies, that cost must be considered as well.

Will I be Able to See All The Same Doctors?

You will need to think about whether or not the physicians who are most important to you can be accessed through a plan indicated by cost savings in medication. This may lead to some difficult choices, particularly if you see multiple specialists.

If you see several doctors, you can ask each of them for a list of the insurance networks they participate in and then choose from those. You could also ask the doctors who currently provide your most critical care to recommend doctors who are in your available plan’s network. If you are doing this, be prepared to bring a print out of the list of participating physicians to an appointment or email the list to your doctor.

It is possible that you will find it difficult or prohibitively expensive to see the specialists you choose or have seen before. In this case, affordable options for care may be available through major hospital clinics.

Clinic wait times will be longer than those found in private practice, but the care itself is generally quality care.

What Should I do If I Need a Drug But Can’t Afford it?

You may find yourself in the position of needing to buy a health insurance plan because it enables you to see a particular specialist such as a mental health professional or endocrinologist that you have an established relationship with, for example. In this case, you would not be choosing a policy based on your prescriptions and might find that prescriptions you usually take to be expensive or unaffordable.

It is possible that a lower-cost generic drug could work for you. Talk to your doctor. If generics turn out to be ineffective, sometimes insurance companies will approve a more expensive version of the medication after you have tried certain generics for fixed amounts of time first. You can appeal to insurance companies. Sometimes it works.

You can try applying to the company who manufacturers the drug. Most have programs to supply low-income patients with medication they need.

It is also possible to shop around for a lower retail cost for a medication you have to pay for out-of-pocket. Large chain stores and big box stores might have much more affordable costs than even a preferred pharmacy.


Health insurance has become far more restrictive over the last few decades. Unless you are among the lucky few who has a great plan through an individual employer, you will need to be prepared to set your priorities and be flexible. By factoring in formularies and preferred providers, you will be able to make the best choices you can for your medical care.

Article Citations
  1. Plan Finder

Author: Linda DeSolla Price

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