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Understanding Medicare Part D Out-of-Pocket Costs

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Summary: Your Medicare Part D costs depend on the specific plan you have and prescriptions you take. Some of your costs may include plan deductibles, copayments/coinsurance, and a plan premium.

When you enroll in a Medicare Part D prescription drug plan, you may be responsible for some out-of-pocket costs. When you understand what these costs are, you can plan for them throughout the year. Here is a rundown of Medicare Part D out-of-pocket costs that might be a part of the plan you select.

Medicare Part D costs: what can you expect?

Your Medicare Part D out-of-pocket costs will vary based on the specific plan you have and the prescriptions you take.

As you might already know, there are a couple of different ways you can get Medicare prescription drug coverage.

  • A stand-alone Medicare Part D prescription drug plan – works alongside your Medicare Part A and/or Part B benefits
  • A Medicare Advantage prescription drug plan – delivers your Medicare Part A, Part B, and Part D benefits all in one plan.

Here are some possible Medicare Part D costs that could apply to either type of Medicare Part D prescription drug plan.

Medicare Part D costs: deductible

Your deductible is the amount you may need to pay – per year – before your prescription drug coverage benefits begin. This Medicare Part D cost is a set amount that is limited by Medicare. In 2019, Medicare prescription drug plans can’t charge any more than $415 for the annual deductible.

The Part D deductible can change from year to year. Some plans might charge the highest deductible allowed, while others might offer a lower deductible. Some plans don’t have any deductible. Once you’ve spent your plan’s deductible amount for the year, you’ll generally pay a copayment or coinsurance each time you pay for a prescription medication.

Medicare Part D costs: copayments and coinsurance

A copayment is a Medicare Part D cost-sharing amount that you might pay every time you pick up a prescription. For example, a medication might cost you $15 (after you’ve paid your deductible).

The amount of the copayment will vary based on your plan – and on the type of medication.

To understand this Medicare Part D cost, you’ll need to how plans price their medications. Each Medicare prescription drug plan has a list of covered drugs called a formulary. Formularies are usually divided into “tiers,” where more costly medications are in the higher tiers.

So, your copayment for a Tier 4 or 5 medication might be higher than this Medicare Part D cost for a Tier 1 medication.

Your Medicare Part D cost each time you pick up a prescription isn’t always a copayment. Sometimes you pay a coinsurance amount. Coinsurance is a percentage of the cost of the prescription drug. Like copayments, the coinsurance can vary depending on the drug tier, or from one plan to another.

Medicare Part D costs: monthly premium

Medicare prescription drug plans may have monthly premiums. Some plans may have low premiums, or even no premiums – you might pay as little as $0 per month. Of course, no matter what premium you may pay for a Medicare prescription drug plan, you’ll still need to pay your Medicare Part B premium every month as well.

Medicare Part D costs in the coverage gap

Here’s a Medicare Part D cost that might not ever affect you – but you should know about it in case it does.

Medicare Part D has a coverage gap, also known as the “donut hole.” If you and your plan, taken together, spend a certain amount on your medications during a calendar year, you might reach the coverage gap. During the coverage gap, your Medicare Part D costs might be higher because your plan coverage could be lower.

If you and your plan spend a combined $3,820 on covered prescription drugs in 2019, you reach this coverage gap phase. During this phase, you’ll pay up to 25% of your plan’s cost for covered brand-name drugs, and up to 37% of the cost of generic drugs. In 2020, you’ll pay no more than 25% of the cost of generic prescriptions during the coverage gap.

Medicare Part D costs: catastrophic coverage

What if your Medicare Part D costs during a single year go as high as $5100? That’s the amount that puts you into the catastrophic coverage phase in 2019. If you reach that threshold, you’ll only pay a small amount for your covered prescription drugs for the rest of the year.

Medicare Part D costs if you get Extra Help

What if you need help with your Medicare Part D costs? You might want to know about the Extra Help program. If you are eligible for Extra Help, your Medicare Part D costs will be lower.

Part D Extra Help is a Medicare program for low-income people. It can help you pay for your prescription drugs if you meet income requirements. If you qualify for this program, you’ll typically get a notice from Medicare.

Medicare Part D costs with the late enrollment penalty

If you need Medicare prescription drug coverage, you might be able to save money by avoiding the Medicare Part D late enrollment penalty. You can sign up for Medicare prescription drug coverage under Medicare Part D when you’re first eligible for Medicare.

You might face the Part D late enrollment penalty if:

  • You don’t sign up when you’re first eligible
  • You go without creditable prescription drug coverage for 63 days in a row or longer

The longer you go without creditable prescription drug coverage, the higher your penalty will be. You’ll typically pay the late enrollment penalty as long as you have your Medicare prescription drug plan. Read more details about the Part D late enrollment penalty.

Now that you know more about your Medicare Part D costs, maybe you’d like to start comparing plans so you can see which plan may be the best deal for you. Enter your zip code on this page to get started. You can even enter your prescription drugs to see which plans cover them.

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