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Medicare Part D is an optional prescription drug benefit offered through private insurance companies. The Centers for Medicare and Medicaid Services (CMS) oversee Part D plans and determine a standard benefit.
Insurance companies offering Part D plans must cover, at minimum, the standard benefit. However, many companies offer benefits beyond what is required in the standard model.
Members should refer to their plan’s Summary of Benefits to learn what their plan covers.
Standard benefit overview
The Part D standard benefit consists of four parts:
Annual deductible phase
Initial coverage phase
Coverage gap phase
Catastrophic coverage phase
Not all Part D plans will include all four phases. For example, some Part D plans don’t have an annual deductible. In addition, some enhanced plans cover the member if they reach the coverage gap phase. Therefore, reviewing your medications with your agent to determine your costs with different Part D plans is essential.
Annual Deductible Phase
According to CMS, no Medicare drug plan can have an annual deductible of more than $480 in 2022. A deductible is an amount the member must pay before the plan begins to pay for medication. Some Part D plans do not have a deductible.
Initial Coverage Phase
Once the member has met their deductible (if applicable), they will begin to pay a copay or coinsurance for each prescription. Refer to your plan’s formulary to find each drug’s copay or coinsurance amount.
The member will move on to the next phase if the total cost of medications reaches $4,430 in 2022. The total price of the drug includes what the member paid (in copays or coinsurance) and what the insurance company paid.
Coverage Gap Phase
If the member has reached the coverage gap, they will be responsible for paying no more than 25% of the total cost for each brand-name and generic medication.
Not all Part D plan members will reach the coverage gap phase. In addition, some plans offer coverage during the coverage gap.
Catastrophic Coverage
Catastrophic coverage begins if the member spends $7,050 on medications in 2022. This amount is only what the member has spent; it doesn’t include the portion the insurance company paid. If the member reaches catastrophic coverage, they will pay a small percentage of the cost of each drug for the remainder of the year.
Each year CMS reviews and adjusts the standard benefit amounts. Speak to your agent to determine if you are enrolled in the Part D plan that best covers your medicines.
If you have questions on the Part D standard benefit or want to learn more about Part D plans that will fit your needs, give us a call today at (800) 398-8714.
Christina Valenzuela
Christina Valenzuela is the co-owner of Vista Mutual Insurance Services, an insurance agency that focuses exclusively on the needs of Medicare beneficiaries. She has worked in the Medicare insurance industry since 2006 and is a licensed insurance producer in multiple states.
Although we strive to be as accurate as possible, any differences between this document and the information on Medicare.gov will be governed by the information on Medicare.gov.
