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Prescription Drug Plan Costs - Part D
What will you pay for prescription drug coverage?
With Medicare Part D, you’ll pay a share of the cost of the medications you take. Each plan that provides drug coverage may include premiums, deductibles, copays or coinsurance. This is true for standalone plans and for Medicare Advantage (Part C) plans with built-in drug coverage.
Each company negotiates its own prices with pharmacies and drug manufacturers. Your copays and coinsurance are calculated using the plan’s price for the drug and guidelines set by Medicare. The price you pay is usually discounted because you’re part of a big group purchase.
Cost sharing generally happens in a three-stage process. In Stage 1, you and the plan together share the total cost for your drugs. In Stage 2, you pay most of the plan’s negotiated price for your drugs. The plan pays very little. This is the coverage gap The cost-sharing stage of a Medicare Part D plan in which you pay most of the plan’s discounted price for your covered medications. You enter the coverage gap when you, others on your behalf and the plan together have paid a pre-set amount for your drugs. This amount is determined by the plan, but Medicare establishes a maximum. You remain in the coverage gap stage until you have spent your plan’s out-of-pocket limit in a single year. Deductibles, copays, coinsurance and other payments count toward the out-of-pocket limit, but premiums do not.
or “donut hole.” Medicare sets a limit for your spending in the coverage gap. In Stage 3, the plan pays most of the cost for your drugs.
Keep reading for more information
Each plan that provides drug coverage will share costs a little differently. You need to look at the details of any plan you’re interested in to see how its Part D cost sharing works.
Here’s a general example of how the three-step cost-sharing process might work.
Now look at these examples showing the savings that may be possible with a prescription drug plan versus without. Remember, these amounts are shown for illustration only. Actual costs with specific plans may be different.
Helen's story: Moderate drug spending*
Helen, age 65, spends $80 a month for two drugs. She joins a Medicare Advantage plan with built-in drug coverage. There’s no additional premium for drug coverage with this plan. Because her spending is fairly low, she only reaches Stage 1, initial coverage. She still saves money with the plan.
| Annual drug costs without a Medicare Part D plan ($80 per month x 12 months) |
$960 |
| Annual premium for drug coverage with Medicare Advantage plan |
$0 |
Stage 1: Initial coverage
(Helen's share during this stage) |
$250 |
| Stage 2: Coverage gap |
$0 |
| Stage 3: Catastrophic coverage |
$0 |
| Total Helen pays out-of-pocket for the year |
$250 |
| Annual savings with Medicare Part D plan |
$710 |
Enrico's story: Heavy prescription drug spending*
Enrico, age 66, has several chronic conditions. Without coverage he spends $950 a month on drugs. He has Original Medicare (Part A and Part B), plus a standalone Medicare Part D drug plan with a $330 annual premium. Because his drug costs are high, he reaches Stage 3, catastrophic coverage.
Annual drug costs without a Medicare Part D plan
($950 per month x 12 months) |
$11,400 |
Annual premium for Part D drug plan
($27.50 per month x 12 months) |
$330 |
Stage 1: Initial coverage
(Enrico's share during this stage) |
$720 |
Stage 2: Coverage gap
(Enrico's additional cost-sharing up to the limit) |
$4,030 |
Stage 3: Catastrophic coverage
(Enrico's share during this stage) |
$236 |
| Total Enrico pays out-of-pocket for the year |
$5,316 |
| Annual savings with Medicare Part D plan |
$6,084 |
*Costs shown are for illustration only. Your actual costs may be different
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