What is meant by the annual cost, annual spend, or estimated annual cost when we do a prescription drug plan (PDP) search on your behalf on Medicare.gov?
Put simply, the estimated annual spend is how much will you spend for your entire prescription drug plan package for the entire year (or remainder of the current year). This number includes the PDP plan premium, your copays and, if applicable, the deductible.
Example: After doing a search on Medicare.gov, the plan that shows up as the best buy for Sam Fuller (fictitious), using his preferred pharmacy has an annual cost of $444. The name of the plan is Good Health Rx (fictitious), and Sam’s annual spend will be $444.
The plan premium is $25 per month. $25 per month x 12 months = $300 for the year.
Let’s say Sam has all tier 1 and 2 generics with low copays. Good Health Rx also has no deductible for tier 1 and 2 generics.
Here’s the list of his prescriptions.
| Name of Drug | Dose | Frequency | Tier | Copay |
| Atorvastatin | 40 mg | 30/month | Tier 2 | $4 |
| Metformin | 500mg | 60/month | Tier 1 | $1 |
| Lisinopril | 20 mg | 30/month | Tier 1 | $1 |
| Amlodipine | 5 mg | 30/month | Tier 2 | $4 |
| Citalopram | 10mg | 30/month | Tier 1 | $1 |
| Meloxicam | 15mg | 30/month | Tier 1 | $1 |
| Total monthly copays | $12 |
Sam’s prescription copays are $12 per month. $12/month x 12 months = $144.
Plan premium = $300 for the year.
Drug copays = $144 for the year.
Sam’s annual cost = $444 ($300 + $144 = $444)
Note: If your plan effective date is mid-year, the annual spend refers to your estimated cost for the remaining portion of the year. Let’s say your Medicare A and B are effective July 1, 2018. You sign up for a PDP in May with a July 1 effective date. Using the above example, your annual cost will be half of the $444 annual or just $222. End