The standard design of the Medicare Part D benefit currently has four distinct phases, where the share of drug costs paid by Part D enrollees, Part D plans, drug manufacturers, and Medicare varies (Figure 1). (The Part D enrollee shares reflect costs paid by enrollees who are not receiving low-income subsidies.)
- In the deductible phase, Part D enrollees pay 100% of their drug costs, up to $505 in 2023. Not all Part D plans charge a deductible, but many enrollees in stand-alone PDPs are in a plan that charges the standard deductible in 2023.
- In the initial coverage phase, Part D enrollees pay 25% of total drug costs and Part D plans pay 75%, up to total drug costs of $4,660 in 2023. However, most Part D plans charge a mix of copayments and coinsurance in this phase rather than a standard 25% coinsurance rate.
- In the coverage gap phase, Part D enrollees pay 25% of total drug costs for both brand-name and generic drugs. Part D plans pay the remaining 75% of generic drug costs and 5% of brand drug costs, and drug manufacturers provide a 70% price discount on brands (there is no manufacturer price discount on generics).
- In the catastrophic phase, Medicare pays 80% of total drug costs (known as “reinsurance”), Part D plans pay 15%, and Part D enrollees pay 5%. Part D enrollees qualify for catastrophic coverage when the amount that they pay out of pocket plus the value of the manufacturer discount on the price of brand-name drugs in the coverage gap phase exceeds a certain threshold amount. In 2023, the catastrophic threshold is set at $7,400, and enrollees themselves will pay about $3,100 out of pocket before reaching the catastrophic phase (this estimate is based on using brand drugs only).
If you have any questions or concerns please contact your Total Benefit Solutions, Inc Medicare health insurance specialist at (215)355-2121.