Q: I take a brand name drug that costs more than $400 per month in 2019 and I have a co-pay of $47. In 2019, I hit the Part D coverage gap. Can you tell me how much I would have to pay in the Part D doughnut hole next year?
A: The Part D doughnut hole will be “closed” in 2020, but that doesn’t mean that your out-of-pocket spending will stop. To the contrary, an unprecedented spike in Medicare’s required out-of-pocket costs means you may pay more than you did in 2019. You will hit the former coverage gap around October or November, depending on whether the price of your prescription goes up.
Although Part D plans are given leeway to vary how they structure their plans here is a breakdown of the standard Medicare Part D plan cost sharing in 2020:
- Deductible: During the initial deductible, the beneficiary pays 100% of the cost of the drug—up to $435 depending on the plan. Many plans provide immediate coverage on generics, and even preferred brand drugs “before the deductible.” In this type of plan, you only pay the full price up to the deductible on higher tier drugs, and some plans don’t charge a deductible at all.
- Initial Coverage Period: During this stage of coverage you pay a co-pay or co-insurance of 25% of the cost of covered drugs, and the plan pays 75%, up to a total of $1,005 (beneficiary) and $3,015 (plan). This includes any applicable deductible. Your plan’s full retail drug cost, not your co-pay, is what counts toward entering the coverage gap. Your co-pays or True Out-of-Pocket costs (TrOOP) count toward exiting the coverage gap and qualifying for catastrophic coverage.
- Former doughnut hole coverage gap: After spending the initial coverage amount of $1,005, you are responsible for 25% co-insurance for both generic and brand name drugs, plus a portion of the pharmacy dispensing fee which is approximately $1 - $3. Your drug plan pays 75% of the cost of generic drugs and 5% on brand-name drugs. The drug manufacturer provides a 70% discount on brand-name drugs. Your total costs in this stage could run as high as $5,345 between the end of the Initial Coverage Period and the Catastrophic stage of coverage begins. Altogether, beneficiaries could be responsible for as much as $6,350 in TrOOP, which includes the drug costs paid by the beneficiary and the 70% discount on brand-name drugs provided by the drug manufacturer. Payments made by the drug plan DO NOT count TrOOP costs.
- Catastrophic Coverage Period: When your total out-of-pocket spending reaches $6,350, you hit the catastrophic stage of coverage. Your co-insurance drops to 5% coinsurance or co-pays of $3.60 generic, $8.95 brand, whichever is higher. You remain in the Catastrophic coverage period until December 31, 2020.