If you have a Medicare Part D prescription drug plan, you have probably received something called an EOB. EOB stands for Explanation of Benefits. It’s a statement that Medicare sends to you every month that you fill a prescription using the Part D coverage. After you have filled a prescription, you will receive an EOB at the end of the following month. You may also receive an Explanation of Benefits statement if your coverage changes or if you change prescription drug plans. It’s important to note that the EOB is not a bill. It’s simply a record of the coverage benefits you have used. Explanation of Benefits statements usually contains six pieces of information.

Section 1: The EOB summarizes all of the drug purchases since the last EOB.

Section 2: It summarizes your year-to-date costs, your total out-of-pocket costs, and total drug costs as well as basic plan information including your deductible, any coverage gaps, and your initial coverage amounts.

Section 3: If you have changed Part D plans, the EOB will also summarize your out-of-pocket and total drug costs transferred from your previous plan.

Section 4: The Explanation of Benefits will also note any adjustments to your out-of-pocket and total drug costs if necessary. For example, if you have a reversed claim or a supplemental wrap-around payment, the EOB form will display them.

Section 5: The EOB will also list any updates to your drug plan’s formulary that overlap with the drugs you take.

Section 6: Finally, the EOB includes a section with contact information as well as for instructions in case you want to appeal any decisions made by Medicare regarding your drug coverage.

Explanation of Benefits Section 1

Section 1 of the EOB shows your prescription purchases for the previous month. There may be one or two charts in this section, depending on whether or not you filled prescriptions using drugs covered by your plan and additional drugs provided via your plan’s supplemental coverage. Each chart is divided into four or more vertical columns.

  1. Column one indicates the drug and the purchase date.
  2. Column two lists the amount that your Part D plan paid for this particular drug.
  3. Column three lists what you paid for this particular drug.
  4. Column four lists what other organizations, such as Medicare Extra help programs, may have paid for this particular drug.

Note that the amount that you paid in column two is the total after any other payments made by organizations on your behalf from column four.

If column two total is $0.00, this means that you are in the deductible stage of your Medicare Part D coverage plan. This means that you are responsible for all of the drug costs. If you are enrolled in a Medicare Extra Help program, you will not have a deductible stage even if your plan ordinarily features one.

Multiple charts

If Section 1 of your Explanation of Benefits statement features more than one chart, this means that some of your prescription drugs are provided under your Medicare Part D plan’s supplemental drug coverage. Medicare displays these drugs on a separate chart in order to reduce confusion and emphasize that any payments made for these prescriptions do not count toward your out-of-pocket costs or your total drug costs.

The drugs do not count toward your totals because they are typically not covered by Medicare’s original plan, hence the supplementary status. The supplemental chart is organized exactly like the main chart, with four vertical columns displaying the drug, the plan payments, your payments, and other organization payments.

Section 1 of your Explanation of Benefits form may also note formulary changes for your drugs as necessary. For example, column one of the first chart will tell you if the drug in question is scheduled for removal from the plan’s drug list at a future date.

If that is the case, you will need to consult with your doctor to determine a suitable replacement. Medicare may also move drugs into different cost tiers on a formulary plan. If so, this will also be noted in Section 1 of your Explanation of Benefits form.

Explanation of Benefits Section 2

If you have filled prescriptions using your Medicare Part D prescription drug plan, you will receive a Medicare form called the Explanation of Benefits. This is important form both for your general understanding of your Medicare benefits and your personal records.

While it is not a bill and requires no action on your part, you should review it to ensure that your pharmacy and Medicare have not made any mistakes relating to your drug coverage that may potentially cost you money. The Explanation of Benefits form is divided into six sub-sections, the second of which is detailed here

Section 2 of your Explanation of Benefits form shows your current drug coverage payment stage. There are four possible stages: deductible, initial coverage, coverage gap, and catastrophic coverage. Medicare shows all four stages on the form and highlights your current stage. You begin in the yearly deductible stage, during which you must pay the full cost of any drugs you need.

You remain in the deductible stage until you have paid a pre-determined amount as specified on your plan. For example, if your Medicare Parat D deductible is $2000, you will have to pay for the first $2000 worth of drugs that you use this year out of your own pocket. Once you have paid $2000, you move to the next stage of the plan.

The second stage is initial coverage, during which your Medicare Part D plan pays its share of any remaining drug costs over and above your deductible. You remain in this stage until your year-to-date drug costs reach the initial coverage limit, after which you move to the third stage.

The third stage of your Part D plan is the coverage gap. During this stage, you receive discounts on name-brand drugs and you pay 58% of generic drug costs. You remain in the coverage gap stage until the amount of your year-to-date out-of-pocket expenses reaches the limit specified by your Part D plan.

The fourth and final stage is catastrophic coverage. Here, your Medicare Part D plan pays for most of your covered drugs. You remain in this stage for the rest of the calendar year, which ends on December 31.

If No Deductible Stage

Section 2 of your Explanation of Benefits chart may look a bit different if your Part D does not have a deductible stage. In this case, the first column (usually reserved for deductible information) will say the following: “Because there is no deductible for the plan, this payment stage does not apply to you.”

Depending on your Part D plan, there are dozens of possible variations in terms of how your individualized EOB Section 2 will appear. It will follow the general format listed above, but it may look slightly different based on whether or not you have brand name deductibles, Low Income Subsidy services, etc. For a complete listing of possible examples, reference the following PDF.

Explanation of Benefits Section 3

Section 3 of the EOB lists your out-of-pocket costs and total drug costs. It is one of the simplest portions of the EOB to understand. The section features a two-column chart. The first column details out-of-pocket costs and the second column details total costs.

Out of pocket costs include:

  • your payment for filling or refilling a Part D prescription drug
  • any payments made on your behalf by third parties (Medicare Extra Help, Medicare’s Coverage Gap Discount Program, AIDS drug assistance programs, Indian Health Service, State Pharmaceutical Assistance Programs, and most charities)

Out of pocket costs do not include:

  • Part D plan monthly premiums
  • drugs not specifically covered by your plan
  • non-Part D drugs (such as drugs administered during a hospital stay)
  • drugs that fall under Supplemental Drug Coverage
  • drugs obtained from an out of network pharmacy
  • any payments made on your behalf by union or employer health plans as well as government programs like TRICARE, the Veteran’s Administration, and Worker’s Compensation.

Total drug costs, listed in the second column of EOB Section 3, include what your Part D plan pays. Total costs also include what you pay as well as what third-party organizations pay on your behalf.

Estimating Your Costs

While it is beyond the scope of this document to estimate the numbers you will see in your individual EOB document, you can get a general idea of what to expect by examining Medicare’s nationwide averages for the current year and factoring in the cost of your frequently used drugs. The average nationwide monthly premium for a Medicare Part D prescription drug plan in 2016 is $34.10. Your plan costs may vary somewhat depending on your state of residence and the specific plan that you choose.

The highest allowable Part D deductible for 2016 is $360. The largest variation will occur based on the drugs that you need. For example, if your annual cost of prescriptions is $3000 and you select a Part D plan that pays 75%, then your annual out of pocket expenses should be approximately $420 (monthly premiums) plus $360 (deductible) plus $750 (25 percent of the $3000 drug cost) for a total of $1530. Keep in mind that this is a very basic example; your numbers will most likely differ.

Explanation of Benefits Section 4

Section four exists to assist you and your doctor in making the necessary adjustments to your drug purchasing routine. Possible formulary changes include:

  • the addition of new drugs
  • the removal of existing drugs
  • the addition or removal of coverage restrictions for drugs
  • moving a drug from one cost-sharing tier to a new cost-sharing tier
  • brand name drugs being replaced by generic drugs
  • prior authorization changes
  • cost-sharing tier increases

In most cases, once you have received the Explanation of Benefits form that explains formulary changes, you will have 60 days before the changes take effect. Exceptions to the 60-day rule are sometimes made in the interests of safety, for example, if a crucial drug is taken off the market.

A Detailed Description of Formulary Changes

Section four of your Explanation of Benefits form will provide a detailed description of formulary changes that alter your coverage or dosages. This section may include subsections on step therapy changes. This will instruct you to try an alternative drug, or multiple alternative drugs in a certain order if your drug of choice becomes unavailable or moved to a different tier.

Section four will also inform you of any quantity limits changes. For example, a drug you have previously used may be changed to feature a quantity limit. This means that you are restricted in terms of how much you may order. The date and exact nature of the change will be specified in section four.

Section four will specify any or all of these changes as they apply to your particular case. It also includes a sub-section titled “what you and your doctor can do” which offers recommendations for you and your physician when it comes to obtaining alternative drugs or dosages.

Explanation of Benefits Section 5

Section five is very straightforward and will usually be the shortest section on the whole document. It explains what you should do if you find a mistake on your Explanation of Benefits form. For example, if your monthly summary lists drugs you’ve not taken or any other incorrect information, you should first call the Member Services phone number for your particular prescription drug plan. Contact numbers will be listed on the EOB document. If you don’t receive appropriate help using those numbers, you may call Medicare directly.

Explanation of Benefits Section 6

Section six of your EOB document will usually be a bit longer than section five. It explains your rights under the Medicare Part D prescription drug program. It also features something called the Evidence of Coverage, which is the rulebook for your particular Part D plan. The Evidence of Coverage lists various rules that you must follow in order to obtain your prescription drugs under Part D. You may also see information relating to LIS (low-income subsidy) Riders in this section if you are part of Medicare’s Extra Help program or are receiving other financial assistance in obtaining your prescription drugs.

If you have issues related to Medicare’s coverage or payments for your drugs, you should look in the Evidence of Coverage document in section six of your Explanation of Benefits form. It will list specific instructions for asking Medicare to pay for part of a bill, as well as instructions on how to lodge a complaint or file an appeal.

Finally, section six of your Explanation of Benefits document features information that may help you obtain assistance in paying for your necessary drugs. It details Medicare’s Extra Help program, which is also called the low-income subsidy (or LIS) program. If your annual income falls below a certain threshold, you can either call the phone number listed for your Part D plan or call Medicare directly at 1-800-633-4227. You may also be able to get help from your state’s pharmaceutical assistance program. Some states have organizations called SPAPs (State Pharmaceutical Assistance Programs) that help based on financial needs, age, and medical condition. The contact information for your SPAP will be listed in your Explanation of Benefits section six Evidence of Coverage document.

by Lindsay Malzone, Lindsay Malzone is the Medicare expert for Medigap.com. She's been contributing to many well-known publications as an industry expert since 2017. Her passion is educating Medicare beneficiaries on all their supplemental Medicare options so they can make an informed decision on their healthcare coverage.
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