The amount you pay for your drugs through your Medicare private drug plan will probably change throughout the year. Your drug costs can change for various reasons.
- Your plan can change the cost of your drugs at any time. So, if you are paying a percentage, such as 15%, of the total cost of the drug (coinsurance), your costs may be different every time you go to the drug store.
- How much your plan is paying for your drugs will vary depending on which coverage period you are in.
How much your Medicare Part D plan pays and therefore how much you pay will change during the year. There are four different coverage periods for Medicare prescription drug coverage.
- Deductible period. If your plan has a deductible, you will have to pay the full cost of your drugs (100%) until you meet that amount. While deductibles can vary from plan to plan, no plan’s deductible can be higher than $405 (in 2018). Some plans have no deductible.
- Initial coverage period. Begins after you meet your deductible (if your plan has one). During this period you will pay a portion of the cost of your drugs (coinsurance or copayment), which varies by drug and by plan, and your plan will pay the rest. How long you are in this initial coverage period depends on your out-of-pocket drug costs (how much you pay and how much certain others pay) and your plan’s benefit structure. Most plans’ initial coverage period ends after you have accumulated $3,750 in total drug costs in 2018.
- Coverage gap. After your total drug costs (what you pay and what your plan pays) reach a certain amount ($3,750 in most plans in 2018), you will reach the coverage gap. During this period your plan does not pay for your drugs. However, as a result of health reform there are federally-funded discounts that will help you pay for your drugs during this time. In 2018 there will be a 65% discount of most brand name drugs. This means you will pay 35% for your brand name drugs and the manufacturer plus the federal government together will pay 65%. For generic drugs there is a 56% discount. This means that for generic drugs you will pay 44% of the cost of the drug and the government will pay 56%. The coverage gap will be completely phased out in 2020 when you will typically pay no more than 25% of the cost of your drugs at any point during the year after you’ve met your deductible.
- Catastrophic coverage. In all Medicare private drug plans, after you have paid $5,000 in 2018 in out-of-pocket costs (regardless of your total drug costs) for covered drugs, you will reach catastrophic coverage. The costs that help you reach catastrophic coverage are:
- Your deductible
- What you paid during the initial coverage period
- Almost the full cost of brand name drugs counts (including the manufacturer’s discount) during the coverage gap towards getting you to catastrophic coverage
- Amounts paid by others, including family members, most charities or other persons on your behalf
- State Pharmaceutical Assistance Programs, AIDS Drug Assistance Programs and the Indian Health Service.
While nearly the full cost of brand name drugs counts towards reaching catastrophic coverage, your monthly premium and the 56% generic discount are not included in the $5,000 out-of-pocket costs needed to get out of the coverage gap into catastrophic coverage. When you reach catastrophic coverage you will pay either a 5% coinsurance on the cost of covered drugs or a copay of $3.35 for covered generic drugs and $8.35 for covered brand-name drugs, whichever is greater.
- Your plan cannot change your deductibles or premium until the following calendar year.
- Many drug plans include both preferred and non-preferred pharmacies in their pharmacy networks. You may pay less for your drugs at preferred pharmacies than at non-preferred pharmacies.
- If you have Extra Help, a federal program that pays most of your Medicare drug costs, your coverage works differently. However, you may also see a change in your costs over time.