With the New Year just beginning, it’s a good time to review the 4 main stages of a model Medicare Part D program. Picking and choosing a plan can be a complete whirlwind in itself and the confusion doesn’t end there. Drug coverage can change throughout the year depending on how much is spent leading to ever changing out of pocket expenses.
Out of pocket expenses vary month to month depending on what phase of coverage you are in and the costs of copayments with either a one month supply versus a 3 month supply of medications.
For example a patient might get a 3 month supply of Drug A in January for $90 along with a 1 month supply of Drug B for $5. They can expect to pay $95 in copayments in January, $5 in February, $5 in March, and $95 again in April, so on and so forth.
These copayments, however, can and will change with each change in stage of coverage. Copayments are determined by the plan design and by which stage of coverage the patient is currently in. By breaking down these 4 stages it can make it easier to anticipate these fluctuations.
Stage 1: Deductible Phase
A deductible is a defined amount of money an insured patient must pay before the insurance plan pays on a claim. The deductible for most Medicare Part D plans is up to the max of $360 allowed by law. The deductible must be paid by the patient before the Medicare Plan pays for any expenses. During the deductible phase patients should expect to pay 100% of the full cost of the drug (regardless if it is a brand or a generic medication). Once a patient has met their deductible or out of pocket expenses (excluding premiums) they will shift into Initial Coverage.
Note: There are some plans that don’t have a deductible. You can visit medicare.gov to explore plans, or speak to one of our team members for more information.
Stage 2: Initial Coverage Phase
During the initial coverage phase patients should expect to pay a 25% co-payment of the full cost of the medication while the insurance company picks up the remaining 75%. For example, if a medication costs $100. The patient will be responsible for a copayment of $25, while the Medicare Plan will pay the remaining $75. This level of coverage will last until the patient’s and the insurance plan’s total drug expenditures for the year reach $3,310.
Once the threshold of $3,310 is reached, the patient will roll into the dreaded Donut Hole phase of prescription drug coverage. The donut hole aspect of the plan was designed by the government to help control expenditures by the Medicare program and defer some additional costs to the patients.
Some insurance plans require the patient to yet again pay 100% of the full cost of the medication for the next $1,540 to a maximum of $4,850 out of total out of pocket expenses for the year. Other plans might require the patient to pay for 45% of brand name medications and 58% of the full cost of generic medications. These percentages are chosen by the individual Medicare plans in accordance with guidelines set by the Medicare program.
Stage 4: Catastrophic Coverage Phase
Should a patient have more than $4,850 in medication expenses in the year they will reach the last and final stage: the Catastrophic Coverage phase. In this phase generic medication copays will only be $2.95 and brand name drug copays will be $7.40 or 5% of the cost of prescription medications, whichever is greater. This phase will last through the end of the year.
Frequently Asked Questions
When is open enrollment, and why does that matter to Medicare recipients?
Open enrollment is October 15th to December 7th. Plans can make changes every year like the cost, coverage, and which providers or pharmacies are in their network to better suit their needs so it’s important to stay informed with these changes and make changes of your own during this time if need be.
Collier’s can’t explicitly point a patient towards one plan or the other but we can analyze a patient’s profile and compile a small list of plans and do a side by side analysis of those plans for the patient to review and choose one for themselves.
If a patient has a question, how can they get more information?
You can always seek advice from any of our knowledgeable pharmacists at Collier Drug Store or visit medicare.gov for helpful sources/tools.
Are there any other tips patients should know when looking at Medicare plans or how to prepare for them?
Knowledge is power. Stay informed with what’s going on with your plan and be aware of formulary changes and notifications they send in the mail. Monthly statements will also contain and track how much out of pocket expenses have been paid and what phase of coverage you are in.
Now that is how a typical Medicare prescription drug plan works in a nutshell. However, there are other options available that can further complicate the issue like advantage plans that can also help with prescription drug costs but that’s a separate issue entirely. Hopefully with this knowledge it will make it easier to navigate through the twelve months of estimated copays, monthly premiums and the rise of costs during the donut hole.