Medicare Part D (also known as Medicare prescription drug benefit) helps reduce the cost of prescription drugs to lessen the burden of health care on those who need it most, but drug costs can change for various reasons.
Reasons your prescription drug prices may change
- If your dosage or quantity changes, the price of the prescription could also change.
- Manufacturers may increase the price of the drug, and this will be reflected in the price you pay for it.
- You may be in one of four coverage periods: deductible period, initial coverage period, coverage gap, and catastrophic coverage period.
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 until you meet the deductible. Deductibles can vary from plan to plan, but no plan’s deductible can be higher than $405 in 2018, and some plans have no deductibles at all.
- Initial coverage period. This begins after you’ve met your deductible. During this period, you will be responsible for co-payments and co-insurance, which vary according to the drug and which plan you have. The length of this period depends on your out-of-pocket drug costs and your plan’s benefit structure. Once you have reached $3,750 in total drug costs, you move on to the next stage.
- Coverage gap. The coverage gap, also called the Medicare donut hole, means your plan does not cover your prescription drug costs. However, there are federally-funded discounts available. In 2018, name brand drugs will be discounted at 65% and generic drugs will be discounted 56%, meaning you’ll pay 35% for name brand drugs and 44% for generic drugs. The good news is that the coverage gap will be completely phased out by 2020, and you will pay no more than 25% of drug costs after you’ve met your deductible.
- Catastrophic coverage. In 2018, you will reach catastrophic coverage once your total out-of-pocket costs have reached $5,000, regardless of your drug costs. Here are the ways you can reach catastrophic coverage:
- Your deductible
- What you paid during the initial coverage period
- Cost of brand name drugs (including discounts) paid during the coverage gap
- Amounts paid by others on your behalf
- State Pharmaceutical Assistance Program, AIDS Drug Assistance Programs, and the Indian Health Service
Although name brand drug costs can help you reach catastrophic coverage, generic drug prices do not count towards the $5,000 needed to get out of the coverage gap. After you’ve reached catastrophic coverage, you will either pay (1) 5% co-insurance for covered drugs or (2) a co-pay of $8.35 for covered name brand drugs and $3.35 for covered generic drugs, whichever is greater.
Another way to save money on prescription drugs is to make sure the pharmacy you use is a pharmacy preferred by your plan. Non-preferred pharmacies can charge you more for your prescription drugs, so it’s important to know which pharmacies you can use.
Depending on your income, Extra Help, also known as the Low-Income Subsidy (LIS), may be an option for you. Extra Help, a federal program administered by Social Security, helps people with low income pay for their Medicare prescription drug costs. If you qualify, it can even help you pay for your prescriptions while you’re in the coverage gap.