Medicare Part D Costs - Medicare Prescription Drug Plans


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What is the cost of a Medicare Part D plan?

Your Medicare Part D prescription drug plan costs may include premiums, deductibles, co-pays or co-insurance. This is true for standalone plans and for Medicare Advantage (Part C) plans with built-in drug coverage.

Each company negotiates prices with pharmacies and drug manufacturers. Your co-pays and co-insurance 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 four-stage process.

  • Stage 1: If your plan has a deductible, you pay the total cost of your drugs until you reach that deductible amount.
  • Stage 2: You and the plan together share the total cost for your drugs.
  • Stage 3: You pay most of the plan’s negotiated price for your drugs. The plan pays very little. This is the coverage gap     or "donut hole." Medicare sets a limit for your spending in the coverage gap.
  • Stage 4: The plan pays most of the cost for your drugs.

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. If you like, you can view Part D prescription drug plans offered by UnitedHealthcare now.

Here's a general example of how the cost-sharing process might work. If your plan has a deductible, the steps below will start after you reach that deductible amount.

Stage 1 Initial coverage You share costs with the plan, usually as co-pays, until the combined total paid by you and the plan hits $2,960 (in 2015). Your share of this amount can vary by plan. Your premium payments do not count toward your share.
Stage 2 Coverage Gap ("donut hole") In 2015, you will pay 65% of the total cost for generic drugs     and about 45% of the total costs for brand–name drugs     until your yearly drug costs hit the 2015 out-of-pocket limit of $4,700. Your premium payments do not count toward this limit.
Stage 3 Catastrophic coverage You pay a small co-pay or co-insurance each time you fill a prescription until year's end. The plan pays the rest.

Now look at these examples showing the savings that may be possible with a prescription drug plan versus without. Remember, these amounts are for illustration only. Actual costs with specific plans may be different.

STORY SUMMARIES

Helen’s story: Moderate prescription drug spending

Enrico’s story: Heavy prescription drug spending

Helen

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.

Total 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

Total annual savings with Medicare Part D plan

$710*

*Costs shown are for illustration only. Your costs may be different.

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Enrico

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.

Total 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

Total annual savings with Medicare Part D plan

$6,084*

*Costs shown are for illustration only. Your costs may be different.

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