Prescription Drug Plan coverage is a valued element within Medicare. Known more commonly as Part D of Medicare, these policies are offered by privately managed insurance companies, and regulated both by the State of Alaska’s Division of Insurance along with the national Centers for Medicare and Medicaid Services (CMS). The cost of your Medicare Part D-covered drugs may change throughout the year. If you notice that your drug prices have changed, it may be because you are in a different phase of Part D coverage. There are four different phases—or periods—of Part D coverage: the deductible period, the initial coverage period, the coverage gap, and catastrophic coverage. As you spend money on your covered drugs, you progress through the coverage periods until the new calendar year starts. Your Part D plan should track your coverage period for you, and this information should appear in your monthly statements.
Details of each coverage phase
Until you meet your Part D deductible, you are in the deductible period. During this time, you will pay the full negotiated price for your covered prescription drugs. While deductibles can vary from plan to plan, no plan’s deductible can be higher than $545 in 2024. Some plans have no deductible, and some plans do not apply a deductible for certain drugs – usually generics.
After you meet your deductible, your plan will help pay for your covered prescription drugs. This is your initial coverage period. Your plan will pay some of the cost, and you will pay a copayment or coinsurance for your prescribed drugs.
You enter the coverage gap when your total drug costs—including what you and your plan have paid for your drugs – reaches a certain limit. In 2024, that limit is $5,030. While in the coverage gap, you are responsible for 25% of the cost of your drugs. The coverage gap is also sometimes called “the donut hole”.
In all Part D plans in 2024, you enter catastrophic coverage after you reach $8,000 in out-of-pocket costs for covered drugs. This amount is made up of costs you pay and some costs that others pay. As of 2024, during this period, you owe no copays or coinsurance for your covered drugs for the remainder of the year.
Not all costs count towards reaching this cap, though. Costs that do not help you reach catastrophic coverage include monthly premiums, what your plan pays toward drug costs, the cost of non-covered drugs, and the cost of covered drugs from pharmacies outside your plan’s network. Out-of-pocket costs that help you reach catastrophic coverage include: your deductible; what you paid during the initial coverage period; almost the full cost of brand-name drugs (including the manufacturer’s discount) purchased during the coverage gap; amounts paid by others, like family members, most charities, and other persons on your behalf, such as the Indian Health Service.
Changes for next year
Beginning in 2025, the structure of Medicare Part D will change. There will be only three coverage phases—the deductible, the initial coverage period, and a zero-cost phase after an out-of-pocket cap is reached. Additionally, your out-of-pocket costs for covered drugs will be limited to $2,000 in deductibles, copays and coinsurance.
Also starting in 2025, you have the choice to spread out-of-pocket Part D costs over the year. This won’t reduce the total amount owed over the year, but it can allow you to spread costs during the calendar year. For example, you could pay your deductible over the course of the year, rather than all at once at the beginning of the year. Whether this type of payment plan will be beneficial will depend on your circumstances and preferences. Remember that these changes are not in effect until 2025.
Be aware of pharmacy and prescription drug fraud
There are different types of fraudulent pharmacy and prescription drug schemes. A common scheme could be when you are billed for a medication that you did not receive or if you are given a different drug than what you were prescribed. It’s important to read both the quarterly Medicare Summary Notices and your plan’s monthly statements to check for errors or suspicious charges. This would include checking your statements to make sure that the medications you picked up from the pharmacy are the type and quantity prescribed.
If you notice any concerns on your statements or with your medications, contact our office.
If you find yourself overwhelmed by any Medicare issue (including the differing costs of your prescription drug costs during the year), please feel free to contact the State of Alaska Medicare Information Office at 800-478-6065 or 907-269-3680; our office is also known as the State Health Insurance Assistance Program (SHIP), the Senior Medicare Patrol (SMP), and the Medicare Improvements for Patients and Providers Act (MIPPA) program.
If you are part of an agency or organization that assists seniors with medical resources, consider networking with the Medicare Information Office. Call us to inquire about our new Ambassador program.
Sean McPhilamy is a volunteer and Certified Medicare Counselor for the Alaska Medicare Information Office.
