Medicare Part D Coverage Phases: How does Part D work?
UPDATED Oct. 27, 2023. There are four Medicare Part D coverage phases (stages). The numbers below are for the year 2024.
Annual Deductible – The First stage of Medicare Part D Coverage Phases
The Annual Deductible is amount you must pay for your prescription drug plan before plan starts to pay. In 2024 the deductible is $545.
Initial Coverage: Copayments and coinsurance
During the Initial Coverage you pay for each covered drug 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 spent and what the insurance company paid) reach in 2024 $5,030. You pay a 25% of the expenses between $545 and $5,030.
Donut Hole (Coverage Gap)
Once the total costs of prescriptions (paid by you and your plan) have reached $5,030, you are paying ALL drug costs (based on discounted prices) until you’ve spent total $8,000 out-of-pocket (2024). This does not include the cost of monthly premiums (you must continue to pay them), but it does cover yearly deductible and coinsurance/copayments. This period is known as the DOUGHNUT HOLE. In 2024, during the doughnut hole, you’ll get the following discounts on your prescriptions: 75% of the price of the plan-covered brand drugs and 75% of the generic plan-covered medicines. Nevertheless, you can count the prescription’s full cost towards the amount you are required to spend to be qualified for catastrophic coverage.
Catastrophic Coverage
Catastrophic Coverage is the last stage of Medicare Part D Coverage Phases. Once you’ve spent $8,000 out-of-pocket during the year of the Medicare Part D plan, the coverage gap ends, and catastrophic coverage begins. Beneficiary cost-sharing in the Catastrophic Coverage stage of Medicare Part D coverage is eliminated starting January 1, 2024. You pay nothing.
Please note that the dollar amounts above represent the MAXIMUM of allowed. Some plans may have numbers below the maximum.
US Government Sources
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