The cost of your Medicare Part D-covered drugs may change throughout the year. If you notice that 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:
- Deductible period: Until you meet your Part D deductible, you will pay the full negotiated price for your covered prescription drugs. Once you have met the deductible, the plan will begin to cover the cost of your drugs. While deductibles can vary from plan to plan, no plan’s deductible can be higher than $545 in 2024, and some plans have no deductible.
- Initial coverage period: After you meet your deductible, your plan will help pay for your covered prescription drugs. Your plan will pay some of the cost, and you will pay a copayment or coinsurance. How long you stay in the initial coverage period depends on your drug costs and your plan’s benefit structure. For most plans in 2024, the initial coverage period ends after you have accumulated $5,030 in total drug costs. In 2025, the initial coverage period ends after you have accumulated $2,000 in out-of-pocket drug costs. Out-of-pocket costs include what you pay for covered drugs during the deductible phase and in copays/coinsurance. After $2,000 in out-of-pocket costs, you enter catastrophic coverage and pay $0 for covered drugs for the rest of the year.
- Note: Total drug costs include the amount you and your plan have paid for your covered drugs.
- Coverage gap: After your total drug costs reach a certain amount ($5,030 for most plans), you enter the coverage gap, also known as the donut hole. The donut hole closed for all drugs in 2020, meaning that when you enter the coverage gap you will be responsible for 25% of the cost of your drugs. In the past, you were responsible for a higher percentage of the cost of your drugs. Although the donut hole has closed, you may still see a difference in cost between the initial coverage period and the donut hole. For example, if a drug’s total cost is $100 and you pay your plan’s $20 copay during the initial coverage period, you will be responsible for paying $25 (25% of $100) during the coverage gap. Beginning in 2025, this coverage phase will be eliminated, and you will enter catastrophic coverage after meeting the $2,000 out-of-pocket cap.
- Catastrophic coverage: In all Part D plans, you enter catastrophic coverage after you reach $8,000 ($2,000 in 2025) in out-of-pocket costs for covered drugs. This amount is made up of what you pay for covered drugs and some costs that others pay. During this period, you owe no cost-sharing for the cost of your covered drugs for the remainder of the year. The out-of-pocket costs that help you reach catastrophic coverage in 2024 include:
- Your deductible
- What you paid during the initial coverage period
- Almost the full cost of brand-name drugs (including the manufacturer’s discount) purchased during the coverage gap
- Amounts paid by others, including family members, most charities, and other persons on your behalf
- Amounts paid by State Pharmaceutical Assistance Programs (SPAPs), AIDS Drug Assistance Programs, and the Indian Health Service
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, the cost of covered drugs from pharmacies outside your plan’s network, and the 75% generic discount.
Your Part D plan should keep track of how much money you have spent out of pocket for covered drugs and your progression through coverage periods—and this information should appear in your monthly statements.
Note: If you have Extra Help, you do not have a coverage gap. You will pay different drug costs during the year. Your drug costs may also be different if you are enrolled in an SPAP.
It is also important to know that under certain circumstances, your plan can change the cost of your drugs during the plan year. Your plan is required to alert you if such changes are made. Your plan cannot change your deductible or premium during the plan year.