Medicare Part D Drug Coverage Limits
Medicare Part D prescription drug coverage is made up of four stages with each stage based on year-to-date prescription drug spending. These stages determine how much you will be required to spend out-of-pocket on your prescription drugs. It is important to understand these prescription drug coverage limits as your drug costs can be considerably higher or lower depending on which coverage stage you fall into.
Stages of Drug Coverage Limits
This is the amount you are required to pay each year for your drugs before your Medicare Prescription Drug Plan will begin to pay its share. Both Medicare Advantage Plans (Medicare Part C) that include drug coverage and Medicare Prescription Drug Plans (Medicare Part D) may have deductibles, although there are some Medicare drug plans that do not have any deductibles.
Deductible amounts can vary between plans. However, no Medicare drug plan may have a deductible of more than $435 in 2020.
You will start in this stage after you have met the deductible associated with your Medicare Part D or Medicare Advantage Plan with prescription drug coverage. In 2020, you will remain in this stage until the total cost of your prescription drugs, which includes your copay and the amount your Medicare Part D insurance provider pays for your drugs, reaches $4,020. Once your total prescription drug costs exceed $4,020, you enter the Coverage Gap Stage, which is also known as the donut hole.
Coverage Gap Stage (the Donut Hole)
While in this stage in 2020 you are responsible for 37% of your plan’s cost for generic (non-brand name) Part D medications and your plan pays the remaining 63%. For brand name drugs you will pay 25% of your plan’s cost for the medications, the drug manufacturer will pay another 70% and your plan will pay the remaining 5%. You will remain in the donut hole until you reach the out-of-pocket maximum of $6,350. It is important to understand that while in the donut hole, the 35% you pay and the 50% the drug manufacturer pays for brand name drugs, in addition to 44% you pay for generic drugs all count towards the out-of-pocket maximum of $6,350. Once you reach the out-of-pocket maximum of $6,350, you enter the Catastrophic Coverage Stage.
Catastrophic Coverage Stage
In 2020, while in this stage you are assured to only pay a small coinsurance amount or copay for covered drugs for the rest of the year. These payments will vary by Medicare Part D providers.
You pay the greater of:
- 5% of the total cost of the drug
- $3.60 for generic drugs, or
- $8.95 for brand-name drugs
The Four Stages
Initial Coverage Stage
Coverage Gap Stage (Donut Hole)
Catastrophic Coverage Stage
|When do you enter this stage?||If your Medicare Prescription Drug Plan has a deductible, you begin your coverage in this stage. The deductible is the amount you are required to pay each year for your drugs before your Medicare Prescription Drug Plan will begin to pay its share.||When you elect a Medicare Part D plan or a Medicare Advantage Plan with prescription drug coverage.||
Once your total prescription drug costs exceed $4,020.
|Once you reach the out-of-pocket maximum of $6,350 for prescription drug costs. (This includes any costs paid by you and/or the drug manufacturer for generic or brand-name drugs during the donut hole/Coverage Gap stage.)|
|What do you pay?||Deductibles amounts can vary between plans. However, no Medicare drug plan may have a deductible of more than $435 in 2020.||
For generic (non-brand name) drugs: 37% of your plan’s cost.
|A small coinsurance amount or copay for covered drugs for the rest of the year. These payments will vary by Medicare Part D providers.|
|What does your plan pay?||$0||All other costs||For generic (non-brand name) drugs:
the remaining 63%.
For brand name drugs: 5% of the cost.
|All other costs|
|What does the drug manufacturer pay?||$0||N/A||For generic (non-brand name) drugs: 0%.
For brand-name drugs: 70% of the cost.
Penalty: Medicare Part D is optional coverage. However, it often makes sense to join a Medicare Part D prescription drug plan when you first become eligible for Medicare because you may pay a penalty if you need to enroll in Part D a later time — and the penalty will increase every month you wait to enroll. Also, while you may be healthy now and require minimal medication, health needs can change unexpectedly.
The penalty is applied to your Medicare Part D premium after your initial enrollment period has ended and you’ve gone 63 consecutive days without either Medicare Part D coverage or some other form of creditable prescription drug coverage (often through an employer or union) that covers the same costs as standard Medicare Part D.
Extra Help is a Medicare program to help people with limited income and resources pay Medicare prescription drug costs. If you qualify:
- Medicare could pay up to 75% or more of your drug costs, including monthly prescription drug premiums, annual deductibles and coinsurance
- You will not be subject to the coverage gap or a late enrollment penalty
Many people are eligible for these savings and don’t even know it.
To see if you qualify for Extra Help, call:
24 hours a day, 7 days a week
The Social Security Office
Mon-Fri: 7 a.m. – 7 p.m.
A MassHealth Health Benefits Advisor
Tufts Health Plan Medicare Preferred
7 days a week: 8 a.m. – 8 p.m.