The cost of your Medicare Part D-covered drugs may change throughout the year. If you notice that your drug prices have changed, it may be because you are in a different phase of Part D coverage.
There are four different phases—or periods—of Part D coverage:
As you spend money on your covered drugs, you progress through the coverage periods until the new calendar year starts. Your Part D plan should track your coverage period for you, and this information should appear in your monthly statements. Let’s now discuss each coverage phase.
Until you meet your Part D deductible, you are in the deductible period. During this time, you will pay the full negotiated price for your covered prescription drugs. While deductibles can vary from plan to plan, no plan’s deductible can be higher than $545 in 2024. Some plans have no deductible, and some plans don’t apply a deductible for certain drugs—usually generics.
After you meet your deductible, your plan will help pay for your covered prescription drugs. This is your initial coverage period. Your plan will pay some of the cost, and you will pay a copayment or coinsurance.
You enter the coverage gap when your total drug costs—including what you and your plan have paid for your drugs—reach a certain limit. In 2024, that limit is $5,030. While in the coverage gap, you are responsible for 25% of the cost of your drugs. The coverage gap is also sometimes called the donut hole.
In all Part D plans in 2024, you enter catastrophic coverage after you reach $8,000 in out-of-pocket costs for covered drugs. This amount is made up of costs you pay and some costs that others pay. As of 2024, during this period, you owe no copays or coinsurance for the cost of your covered drugs for the remainder of the year. Not all costs count towards reaching this cap, though. Costs that do not help you reach catastrophic coverage include monthly premiums, what your plan pays toward drug costs, the cost of non-covered drugs, and the cost of covered drugs from pharmacies outside your plan’s network.
Remember that your drug costs can change throughout the year for reasons other than coverage periods. Plans can change drug costs at the start of each year. And under certain circumstances, your plan can change drug costs in the middle of the plan year, too. Your plan is required to alert you if it makes such changes. While plans can change the cost of your drugs midyear, they cannot change your deductible or premium during the plan year.
Beginning in 2025, the structure of Medicare Part D will change. There will be only three coverage phases – the deductible, the initial coverage period, and a zero-cost phase after an out-of-pocket cap is reached. Additionally, your out-of-pocket costs for covered drugs will be limited to $2,000 in deductibles, copays, and coinsurance. Also, starting in 2025, you have the choice to spread out-of-pocket Part D costs over the year. This won’t reduce the total amount owed over the year, but it can allow you to spread the costs over 12 months. For example, you could pay your deductible over the course of the year rather than all at once at the beginning of the year. Whether this type of payment plan will be beneficial will depend on your circumstances and preferences. Remember that these changes are not in effect until 2025.
Your SHIP is here for you! You can contact your SHIP for any Medicare-related questions or concerns you have. SHIP counselors are government funded to provide trusted, unbiased Medicare counseling at no cost to you. (Depending on your state, your SHIP may go by another name.) Use our online SHIP Locator or call 877-839-2675 (and say “Medicare” when prompted) to find your local SHIP.
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