There are four stages in Medicare Part D coverage.
You pay the first $405 of drug costs before the plan starts to pay.
Initial Coverage: Copayments and coinsurance
For each covered drug you pay a copayment/coinsurance (defined by the plan), and the plan pays its share. The typical coinsurance is 25%, i.e. you are paying 25% of the drug costs but the insurance company pays the rest. The initial coverage continues until the total drug costs (total of what you’ve paid and what the insurance company paid) reach $3,750. You pay a 25% of costs between $405 and $3,750.
Donut Hole (Coverage Gap)
Once the total costs of prescriptions (paid by you and your plan) have reached $3,750, you are paying ALL drug costs (based on discounted prices) until you’ve spent total $5,000 out-of-pocket. This does not include the cost of monthly premiums (you must continue to pay them), but it does include yearly deductible and coinsurance/copayments. This period is known as the donut hole. In 2018, during the donut hole you’ll get the following discounts on your prescriptions: 65% of the price of the plan-covered brand drugs and 56% of the plan-covered generic drugs. Nevertheless, you can count the prescription’s full price towards the amount you are required to spend in order to be qualified for catastrophic coverage.
Once you’ve spent $5,000 out-of-pocket during the year of the Medicare Part D plan, the coverage gap ends and catastrophic coverage begin. You are only paying the greater of either a small coinsurance (5%) or a small copayment ($3.35 for generic drugs or $8.35 for brand name drugs) for each drug until the end of the calendar year.
Please note that the dollar amounts above represent the MAXIMUM of allowed. Some plans may have numbers below the maximum.
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