We get lots of questions at this time of year about this, so let's discuss Part D prescription drug coverage and the "donut hole" in Medicare.
Part D is designed to help reduce the cost of your prescriptions. Medicare has four standard payment phases included in your Part D plan: Deductible, Initial Coverage, Coverage Gap, and Catastrophic Coverage.
The amounts required to move from phase to phase are set by Medicare and change every year. Essentially, once you and your drug plan have spent a certain amount on meds, you end up in the coverage gap commonly known as the donut hole, where you have to pay more for your prescriptions out-of-pocket.
Generally, people who take generics or a small number of prescriptions don’t usually end up in that payment phase, but if you take brand named prescriptions then it’s more common to reach that gap mid-year. This is because the spending amount to get into the gap is based on the retail cost of your medications, which is a combination of what the drug plan pays and your copays.
A generic blood pressure medication that retails for $5/month will not get you to the gap, but something like Ozempic that retails for $2000/month will get you there fairly quickly. When you get to the gap, for most plans, you will pay 25% of the cost of the medication, which would be $1.25 for our generic example or $500 for our Ozempic example.
It's important to plan for this coverage gap by understanding your prescription drug costs and the specifics of your Part D plan. By doing so, you can explore options for minimizing the impact of the donut hole, such as considering generic drugs, discussing medication alternatives with healthcare providers, and utilizing patient assistance programs offered by pharmaceutical companies.
To address concerns around prescription drug costs, the Inflation Reduction Act of 2022 redesigned the Part D program. It eliminated the gap in 2025 and added more provisions that went into effect this year, including the $35/month cap on insulin, the cost to get into the gap increasing and the elimination of the coinsurance for the catastrophic coverage phase. Next year we will see even greater provisions implemented when the out-of-pocket costs are capped at $2000, and Medicare will negotiate pricing for certain brand-name drugs.
Watch for more information about your drug plan in September when the drug plans send out their Annual Notice of Change and we will also keep you updated as we get new information to share.
If you have any additional questions, contact our team today!
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