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The Phases of your Medicare Part D Coverage

Your Medicare Part D-covered drug costs may change throughout the year. If you notice that the price has changed, it may be because you are in a different phase of your Part D coverage.

Four different phases of Part D coverage:

Deductible period

Until you meet your Part D deductible, you will pay the full negotiated price for your covered prescription drugs. After this, the plan will begin to cover the cost of your drugs. While deductibles can vary from plan to plan, it can't be higher than $435 in 2020, and some plans have no deductible.

Initial coverage period

 After you meet your deductible, your plan will help pay for your covered prescription drugs. They will pay some of the cost, and you will pay a copayment or coinsurance. How long you stay in the initial coverage period depends on your drug costs and your plan’s benefits structure. For most plans in 2020, the initial coverage period ends after you have accumulated a total drug cost of $4,020. 

Note: Total drug costs include the amount you and your plan have paid for your covered drugs.

Coverage gap

After your total drug costs reach a certain amount, you will now enter the coverage gap, also known as the donut hole. The donut hole closed for all drugs in 2020, meaning that when you enter the coverage gap you will be responsible for 25% of the cost of your drugs. In the past, you were responsible for a higher percentage of the cost of your drugs. And although the donut hole has closed, you may still see a difference in cost between the initial coverage period and the donut hole. 

Catastrophic coverage

In all Part D plans, after you have paid $6,350 in 2020 in out-of-pocket costs for covered drugs (this not the total drug costs that you and your plan have paid), you will now reach catastrophic coverage. During this period, you pay significantly lower copays or coinsurance for your covered drugs for the remainder of the year. 

The out-of-pocket costs that help you reach catastrophic coverage include:

    • Your deductible
    • What you paid during the initial coverage period
    • Almost the full cost of brand-name drugs (including the manufacturer’s discount) purchased during the coverage gap
    • Amounts paid by others, including family members, most charities, and other persons on your behalf
    • Amounts paid by State Pharmaceutical Assistance Programs (SPAPs), AIDS Drug Assistance Programs, and the Indian Health Service

Costs that do not help you reach catastrophic coverage include monthly premiums, the cost of non-covered drugs, the cost of covered drugs from pharmacies outside your plan’s network, and the 63% generic discount. During catastrophic coverage, you will pay 5% of the cost for each of your drugs, or $3.60 for generics and $8.95 for brand-name drugs, whichever is greater.

Your Part D plan should keep track of how much money you have spent out of pocket for covered drugs and your progression through coverage periods and this information should appear in your monthly statements.

If you have Extra Help, you do not have a coverage gap. You will pay different drug costs during the year. Your drug costs may also be different if you are enrolled in an SPAP.

It is also important to know that under certain circumstances, your plan can change the cost of your drugs during the plan year. Your plan is required to alert you if such changes are made. Your plan cannot change your deductible or premium during the plan year.

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Medicare Part D Costs for 2020

Before 2006, Medicare did not cover prescription medications. There was a limited number of medications that were offered under Medicare Part Band,  and otherwise, you had to pay for your medications out of pocket. In 2003, everything had changed when President George W. Bush passed the Medicare Prescription Drug, Improvement, and Modernization Act (MMA). This is what we now know of as  Medicare Part D , an optional part of Medicare that provides prescription drug coverage. Part D plans are run by private insurance companies and not by the government. However, the federal government sets guidelines on what basic medications are covered and how much you can be charged.  A deductible is the amount of money you spend out of pocket before your prescription drug benefits begin. Your plan may or may not have a deductible. The maximum deductible a plan can charge for 2020 is set at $435. It has increased by  $20 from 2019. Part D
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