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Understanding Your Medicare Prescription Drug Plan in 2024

For anyone enrolled in Medicare, it’s advantageous to be familiar with the various stages of prescription drug coverage. This is especially true for those taking the most expensive medications. Here’s what I think you need to know……..

All Medicare Prescription Drug Coverage (Part D) is governed by four stages of coverage. It doesn’t matter whether you are covered under an individual Medicare Prescription Drug Plan (Option 1) or a Medicare Advantage Plan (Option 2). The same rules apply to all Medicare Prescription Drug coverage. All Medicare Prescription Drug Plans are designed around four stages of coverage.

The Four Stages of Your Medicare Prescription Drug Coverage

STAGE #1: The Deductible Phase

In 2024, no plan’s annual deductible may exceed $545. Deductible amounts and how they apply may vary from plan to plan (while not exceeding the $545 annual max). Some plans may have a modified deductible. Other plans may have no deductible at all. Until you meet your yearly Prescription Drug deductible (if you have one), you will pay the full discounted cost of your covered prescriptions. Once the annual deductible is met, the plan starts covering the cost of your drugs based on your respective plan’s prescription drug benefits.

STAGE #2: The Initial Coverage Phase or Before the Gap Coverage

This is the stage after you have met your deductible, if applicable, and before your total drug expenses have reached $5,030 in 2024, including the combined amounts of what you’ve paid and what your plan has paid on your behalf. In this stage, you will either pay a copay or coinsurance (a percentage of the drug’s cost) for a covered medication. This phase lasts until you and your plan reach a total of $5,030 in 2024 drug spending, at which time you move into the Coverage Gap phase. Note: Spending includes your annual deductible as well as your copayments or coinsurance. Premiums do not count towards out-of-pocket costs.

STAGE #3: The Coverage Gap Phase or During the Gap Coverage

This stage is often referred to as the “Donut Hole.” It occurs after you and your plan reach $5,030 in 2024 in drug spending. During this stage of coverage, you are usually responsible for paying a higher portion of the drug cost. You’ll pay no more than 25% of the cost of your covered medications. Once you reach a combined total cost of $8,000 in 2024, you move into the Catastrophic Coverage phase. Note: Some plans provide additional coverage in the Coverage Gap, which can lower your share of the drug cost during this phase.

STAGE #4: The Catastrophic Coverage Phase or After the Gap Coverage

After reaching a total of $8,000 in 2024 in out-of-pocket prescription drug expenses, you will pay $0 for covered Part D drugs. This phase lasts until the end of the plan year. Your benefits will reset at the start of the next calendar year.
(Note: Paying $0 for medications upon reaching this phase is new for Plan Year 2024. This represents a departure from the past. In previous years, Medicare beneficiaries were expected to pay 5% of the cost of medications for the balance of the year upon reaching the Catastrophic Coverage Phase.)

Looking down the road…… beginning in 2025, your out-of-pocket drug costs will be capped at $2,000.

If there are specific topics you’d like us to address in future issues please drop us a line at 65plus@bbginc.net with your suggestions.