There are a few different Part D basics you should know. However, learning the stages of a Part D plan might be the most important. Every Medicare Part D plan consists of four stages.
As you use your Part D plan throughout the year, you move through the stages. The type of medications you’re prescribed will determine how quickly you move through the stages or if you even will enter all four stages.
During each stage, you are responsible for a certain portion of your drug costs, depending on which drug plan carrier you choose.
The Four Stages of Medicare Part D
The stages are as follows:
- Annual Deductible: As of 2018, the highest a Part D plan can set its annual deductible is $405. Until the deductible is met, you pay the networks price for each prescription. Once you have spent $405 out-of-pocket, you move on to the Initial Coverage stage.
- Initial Coverage: During this stage you pay copays for your prescriptions. Each drug formulary specifies which tier each drug falls under. Depending on which tier the drug is in will determine how much your copay will be. In 2018, once you and your plan has spent a total of $3,750 you will move into the Coverage Gap.
- Coverage Gap: Better known as the donut hole, the coverage gap is where you pay a certain percentage of the total medication cost. During 2018, you pay 35% of brand name drugs and 44% of generic drugs. Once your total drug costs hit $5,000, you move on to the fourth and final stage, Catastrophic Coverage.
- Catastrophic Coverage: This stage of your Part D plan is usually where you pay the least amount for your drugs. During this stage, you will only have to pay 5% of your prescription cost. You remain in this stage until the calendar year is over.
All insurance carriers offering Part D drug plans must include the minimum coverage outlined above. However, many carriers offer richer plans, such as plans that waive the deductible, for an extra premium.
Each carrier also sets its own pricing, formulary and copays every year, too, so it’s important to research which plan offers you the lowest out of pocket costs for your specific RX needs. You must also be careful to review your plan’s benefits from year to year.
The plan’s benefits, formulary, pharmacy network, premium and/or copayments and coinsurance may change on January 1 each year. This is your opportunity to determine whether your current plan is still the most suitable plan for you for the next year.
Medicare Part D drug spending is tracked by the carrier you are insured with. If you move to a new county and have to change plans mid-year, the amount you have spent transfers with you to the new carrier and they continue the tracking.
For help understanding your Medicare Part D Prescription Drug Plan options, please fill out our online help request: