Drug coverage ins and outs

Just because your doctor prescribed it, doesn’t mean Medicare will pay for it!

Medicare Part D provides beneficiaries with outpatient prescription drug coverage, but it doesn’t cover everything your clinician prescribes! There are several stages in Part D coverage, so it can be confusing to learn. However, educating yourself will ensure that you are not left with a costly gap in prescription drug coverage. 

You have two options for how to enroll in the Medicare Part D: through a stand-alone prescription drug plan (PDP) with Original Medicare, or through a Medicare Advantage prescription drug plan (MA-PD). In 2022, beneficiaries have 722 stand-alone PDPs to select from. While you are not required to be enrolled in Medicare Part D, LINK describes the penalties you may face if you delay enrollment and want prescription drug coverage in the future. Regardless of how you enroll in Part D, there are four coverage stages:

  1. Annual Deductible
    While the deductible will change based on the plan that you select, the maximum allowed Part D deductible for any plan is $480 in 2022. While some plans will charge the full deductible, others may only charge part or none of the expense. It is important to look at your specific plan to ensure that your deductible applies to the medications that you take, as some only apply to drugs in specific tiers. Purchases of medications outside of those tiers will not count toward your deductible.
  2. Initial Coverage
    Once you meet your Part D deductible (or in cases where you do not have a deductible), initial coverage kicks in. In this stage, your Part D plan will pay for a part of prescription medications that you purchase, as long as that drug is on the plan’s drug formulary (its list of covered drugs). You are then responsible for paying for the copayment (a set amount) or coinsurance (a percentage of the cost), which will vary depending on your plan. Each plan has tiers of drugs, which impacts the copayment or coinsurance amount. For example, a Tier 1 drug (a generic medication) might be much more expensive than the same medication’s brand name drug, which falls in Tier 3 on a certain plan. If you and your plan have paid a combined $4,430 (in 2022), you move on to the coverage gap. Note that this amount does not include your monthly premium.
  3. Coverage Gap
    Once you have reached the limit for initial coverage for the year, you enter what is known as the coverage gap (also known as the “donut hole”). In this window (which falls between $4,430 and $7,050 in 2022), you pay 25% of the retail cost of a medication up until your out-of-pocket cost reaches $7,050. In this gap, Medicare ONLY counts the total costs that you have paid out of pocket (and does not factor in anything that your plan or the government have contributed). While you do not pay as much in this gap for brand-name medications as you might during initial coverage, you are likely paying far more than the generic price.
  4. Catastrophic Coverage
    If you reach the spending limit of $7,050 in the coverage gap, you become eligible for catastrophic coverage, in which you pay a coinsurance or copayment amount set by Medicare for all covered prescription drugs (typically 5% of costs, with the government or your plan covering 95% of the costs). This phase will continue until the end of the plan year.

To ensure that the medications you take are covered by your plan, it is important to stay updated on any formulary changes to confirm that your medications fall in tiers that are included to meet your annual deductible. Visiting the Medicare website will allow you to estimate your drug costs and view plans based on your geographic location. 



Blue RX Medicare Plans – The Four Coverage Stages of Medicare’s Part D Program
Boomer Benefits – What is Part D?