The rules for cost sharing are different under Medicare Part D plans. In fact, the price you’ll pay out of pocket for your drugs are likely to change throughout the year. Watch this episode of our Medicare Minutes series to get help estimating how much your drugs cost on Medicare in 2019.
How much will my drugs cost on Medicare?
Today, we’re going to talk about one of the biggest costs most people face while on Medicare: prescription drugs.
The average Medicare enrollee takes 5 prescriptions each day. The Medicare program itself spends over $100 billion on pharmaceuticals every year. Even if you aren’t currently taking any prescription drugs, it is more than likely that you will at some point in the future.
Fortunately, since they were established in 2006, Medicare Part D plans have helped Medicare recipients pay for the expensive prescription drugs that may have been inaccessible to them otherwise. Each Part D plan has its own formulary, which is a list of drugs it will cover. It is important to ensure that the plan you purchase includes any prescriptions you are currently taking or plan to take in the near future.
The rules for cost sharing work differently under Medicare Part D plans
Because Medicare Part D was not a part of the Original Medicare program, its rules for cost sharing work differently. There are four phases of drug coverage under a Part D plan. The amount you’ll pay (whether through a copayment or coinsurance) will vary throughout the year depending on which phase you are currently in.
The four phases of drug coverage under a Medicare Part D plan
In the first phase, you’ll pay 100% of your drug costs until you reach your plan’s yearly deductible. Many Part D plans and Medicare Advantage plans have a $0 deductible. If your plan does have a deductible, it will never exceed the yearly cap set by the federal government, which was $405 in 2018.
In the second phase, known as the Initial Coverage Limit, you’ll pay a copay or coinsurance for the drugs covered in your formulary. The amount you are responsible for will vary depending on a few factors. The particular plan you are enrolled in can be a factor. Another is which tiers your drugs fall under in your plan’s formulary. Whether your drugs are brand name or generic can also be significant. Once you and your plan have spent a total of $3,820, you will move into the third phase of drug coverage. This phase is known as the coverage gap or donut hole.
In the coverage gap phase, you will no longer pay a copay or coinsurance for your drugs. Instead, you will be responsible for paying a percentage of the full price of the drugs. In 2018, individuals paid 35% for brand name drugs. In 2019, due to recent legislation, individuals only have to pay 25% of the total cost for brand name drugs. You will remain in the coverage gap phase until your total out-of-pocket costs for the year reach $5,100. Don’t worry: the money you spent in the first two phases will count toward this total.
The final phase is known as the Catastrophic Coverage phase. At this point, your plan will once again step in to cover most of your drug costs for the remainder of the year.
Want to learn more about drug costs on Medicare?
If you have any other questions about Medicare Part D plans, read our article on Medicare drug costs.