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Prescription Drug plans of Part D

Prescription Drug Plans, also called “PDP,” can come as a stand-alone plan or as part of a Medicare Advantage plan called “MA-PD”. The cost associated with a PDP can be a monthly premium, deductible, and co-pays.

Most plans are structured with tiers. The cost of the drug determines what tier that drug is categorized in. The higher the tier, the higher the co-pay.

Costs in the coverage gap

Most Medicare Prescription Drug Plans have a coverage gap (also called the “donut hole”). This means there’s a temporary limit on what the drug plan will cover for drugs.

Not everyone will enter the coverage gap. The coverage gap begins after you and your drug plan have spent a certain amount for covered drugs. In 2017, once you and your plan have spent $3,700 on covered drugs, you’re in the coverage gap. This amount may change each year. Also, people with Medicare who get Extra Help paying Part D costs won’t enter the coverage gap.

Brand-name prescription drugs

Once you reach the coverage gap in 2017, you’ll pay 40% of the plan’s cost for covered brand-name prescription drugs. You get these savings if you buy your prescriptions at a pharmacy or order them through the mail. The discount will come off of the price that your plans has set with the pharmacy for that specific drug.

Although you’ll only pay 40% of the price for the brand-name drug in 2017, 95% of the price—what you pay plus the 50% manufacturer discount payment—will count as out-of-pocket costs which will help you get out of the coverage gap. What the drug plan pays toward the drug cost (5% of the price) and what the drug plan pays toward the dispensing fee (55% of the fee) aren’t counted toward your out-of-pocket spending.

Example

Mrs. Anderson reaches the coverage gap in her Medicare drug plan. She goes to her pharmacy to fill a prescription for a covered brand-name drug. The price for the drug is $60, and there’s a $2 dispensing fee that gets added to the cost. Mrs. Anderson will pay 40% of the plan’s cost for the drug and dispensing fee ($62 x .40 = $24.80). The amount Mrs. Anderson pays ($24.80) plus the manufacturer discount payment ($30.00) count as out-of-pocket spending.  So, $54.80 counts as out-of-pocket apending and helps Mrs. Anderson get out of the coverage gap.  The remaining $7.20, which is 10% of the drug cost and 60% of the dispensing fee paid by the drug plan, doesn’t count toward Mrs. Anderson’s out of pocket spending.

If you have a Medicare drug plan that already includes coverage in the gap, you may get a discount after your plan’s coverage has been applied to the price of the drug. The discount for brand-name drugs will apply to the remaining amount that you owe.

Generic drugs

In 2017, Medicare will pay 49% of the price for generic drugs during the coverage gap. You’ll pay the remaining 51% of the price. What you pay for generic drugs during the coverage gap will decrease each year until it reaches 25% in 2020. The coverage for generic drugs works differently from the discount for brand-name drugs. For generic drugs, only the amount you pay will count toward getting you out of the coverage gap.

Example

Mr. Evans reaches the coverage gap in his Medicare drug plan. He goes to his pharmacy to fill a prescription for a covered generic drug. The price for the drug is $20, and there’s a $2 dispensing fee that gets added to the cost. Mr. Evans will pay 51% of the plan’s cost for the drug and dispensing fee ($22 x .51 = $11.22). The $11.22 amount he pays will be counted as out-of-pocket spending to help him get out of the coverage gap.

 

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