What is a Combined Medical and Drug Deductible?

Having health insurance helps protect you from large medical expenses. However, most plans involve cost-sharing through deductibles, copays, and coinsurance. One approach some health plans use is a combined medical and drug deductible.

What is a Deductible?

First, let’s review what a deductible is.

A deductible is the amount you pay for healthcare services before your insurance plan starts to pay. For example, if your deductible is $1000, you pay 100% of costs until you reach $1000. After your deductible is met, you start sharing costs with your plan through copays or coinsurance.

Deductibles reset each year on January 1st for most plans. Some common types include:

• Medical Deductible – Applies to services like doctor visits, hospitalization, lab tests, medical equipment, etc. Preventive care is often exempt.

• Prescription Drug Deductible – Applies specifically to prescription medications.

• Combined Medical and Drug Deductible – Applies to both medical services and prescriptions.

Higher deductibles generally mean lower monthly premiums. However, you take on more upfront costs before coverage kicks in.

What is a Combined Medical and Drug Deductible?

A combined deductible means your plan has one shared deductible that applies to both medical services and prescription drugs.

For example, if your combined deductible is $2000, you pay 100% out-of-pocket until you’ve spent $2000 on both medical care and prescriptions. Once the $2000 is reached, your plan starts covering a portion of costs.

With separate deductibles, you would have to meet the medical deductible and a separate drug deductible before coverage begins. A combined approach means meeting just one deductible threshold.

Combined deductibles are common in High Deductible Health Plans (HDHPs) compatible with Health Savings Accounts (HSAs). The standard IRS minimum deductible for HSA-qualified HDHPs is $1400 for individual and $2800 for family coverage in 2022. Most HDHPs have combined medical and drug deductibles at or above these levels.

How Combined Deductibles Work

Here is an overview of how combined medical and drug deductibles work:

• You pay 100% of medical and pharmacy costs until the deductible is reached
• All eligible expenses apply towards the deductible
• Once the deductible is reached, you pay copays or coinsurance while the plan covers the remainder
• Preventive services are often exempt from the deductible
• The deductible resets annually, requiring you to meet it again the next year

For example, Sarah has a $2000 individual combined deductible plan. Early in the year she has a doctor visit ($250) and fills two prescriptions ($80 each). Sarah pays 100% of these costs totaling $410. This goes towards her deductible.

Later in the year, Sarah has a hospital stay costing $2500. She pays the remaining $1590 to reach her $2000 deductible. The plan covers the additional $500 hospital cost. For the rest of the year, Sarah only pays copays or coinsurance until her deductible resets.

Pros and Cons of Combined Deductibles

Combined medical and drug deductibles have some potential advantages and disadvantages:

Pros

• May allow lower premiums due to higher deductible
• Simpler than coordinating separate deductibles
• Payments for any service contribute towards deductible
• Encourages smarter healthcare spending

Cons

• Must pay all costs out-of-pocket until deductible met
• Delays drug coverage since drugs apply to deductible
• Discourages use of routine and preventive care
• Higher upfront burden if both medical and drug needs

Combined deductibles promote consumer-driven healthcare plans. The tradeoff is higher potential spending for the member in exchange for lower premiums. It incentivizes judicious use of both medical services and prescription drugs.

What Counts Towards a Combined Deductible?

With a combined deductible, expenses that count towards both the traditional medical deductible and a drug deductible accrue towards the shared threshold. This includes:

• Doctor visits
• Hospital services
• Lab tests and imaging
• Emergency room care
• Medical equipment and supplies
• Mental health and substance abuse treatment
• Physical therapy and rehabilitation services
• Most prescription drugs
• Dental and vision care (if elected)

Notably, preventive services are exempt from deductibles in all ACA-compliant plans. This includes:

• Routine health exams and screenings
• Immunizations and vaccinations
• Cancer screenings (mammograms, colonoscopy)
• Health counseling (diet, tobacco cessation)
• Women’s health services (contraception, prenatal care)
• Well child visits and shots

While you must meet the overall deductible before coverage begins, preventive care is covered 100% by the health plan regardless. This removes barriers to recommended preventive services.

Strategies for Managing Combined Deductibles

High combined deductibles present challenges. Here are some tips for managing them:

• Fund your HSA – Contribute to a Health Savings Account if enrolled in an eligible HDHP. HSAs help pay for out-of-pocket costs.

• Compare drug costs – Weigh generic vs brand name drug costs. See if switching medications can save money.

• Use preventive care – Take advantage of no-cost preventive services to address issues early before they require extensive treatment.

• Review bills carefully – Verify all charges applied properly towards your deductible. Report any errors.

• Plan ahead – Know your deductible amount and effective date. Budget for upcoming expenses like refills.

• Shop around – Compare costs between providers and pharmacies when possible. Don’t overpay.

• Look for assistance – Find if drug manufacturers or providers offer financial assistance programs.

Conclusion

Combined medical and drug deductibles merge separate cost-sharing requirements into one overall deductible threshold. This provides simpler cost-sharing, often with lower premiums. But it means potentially higher out-of-pocket costs, especially for those utilizing both medical services and prescription drugs in a given year.

Consider both premiums and expected care usage when evaluating plans with combined deductibles. Take advantage of preventive care exemptions. And use available savings and support strategies to help navigate any high upfront costs before coverage kicks in.