When someone talks about their cost for a medical procedure or prescription, they likely mean the amount they paid with health insurance. It’s how most people pay for medical care and medications.  

Medical and pharmacy benefits are two different things, however. Understanding the key differences can make navigating either one an easier task. The more you know, the better you can manage your healthcare expenses and experience, too.  

Pharmacy Benefit: Your Everyday Medication Ally 

The pharmacy benefit is designed to cover prescription medications that you typically get from retail, specialty or mail-order pharmacies. Factors that make up the pharmacy benefit include: 

• Formulary Management: Think of a formulary as a menu of covered medications. Pharmacy benefit managers (PBMs) work with insurers to decide which drugs are included and categorize them into tiers that then will determine your copayment or coinsurance amount. 

• Cost Management: You usually pay a fixed portion of the medication cost, known as a copayment, copay, or coinsurance which varies based on the drug’s tier. 

• Utilization Management: Techniques such as prior authorization might require your insurance provider to approve the medication your healthcare provider has prescribed. Additionally, step therapy requires trying a more affordable medication before opting for a more expensive alternative. These measures help ensure that medications are used appropriately and cost-effectively.  

Medical Benefit: The Comprehensive Care Provider 

The medical benefit covers a broader range of healthcare services, including: 

• Inpatient and Outpatient Services: These include hospital stays, surgeries, and physician visits. Medications administered in these settings, such as injectable drugs, are typically covered under the medical benefit.  

• Preventive Services: Routine check-ups, screenings, and vaccinations fall under the medical benefit, promoting overall health and early disease detection.  

• Specialty Medications: Some high-cost medications, especially those administered in a clinical setting, may be covered under the medical benefit rather than the pharmacy benefit or they may be covered under both. Make sure to check with your medical and pharmacy benefit to determine the most cost-effective route for these medications as there can be large differences in member pricing. 

Key Differences 

• Coverage Setting: Pharmacy benefits cover medications only, while medical benefits cover medical services like hospitalizations, physician visits and drugs administered in clinical settings. 

• Management: Pharmacy benefits focus on outpatient medications and are often managed by PBMs, whereas medical benefits are broader and managed directly by health insurers.  

Impact on Rx Plans 

Understanding these differences is crucial for everyone involved in healthcare: 

• For Healthcare Providers: Knowing how medications are covered can influence prescribing decisions. 

• For Consumers: Awareness of which benefit applies can help anticipate out-of-pocket costs and navigate insurance claims. 

• For Employee Benefits Managers: Optimize coverage to meet employee needs, such as ensuring high-cost specialty medications are strategically aligned to either the medical benefit or pharmacy benefit to eliminate confusion for the member and ensure the most cost-effective plan is utilized. 

Be sure you know and understand how specific medications are covered under your plan. Coverage can vary significantly, and some medications might be covered under one benefit but not the other. If your plan offers RxSS, you can always call our Pharmacy Support team for explanations and information that can help you or your provider make important decisions.