How Part D Works

Medicare Part D is prescription drug insurance that was established by Congress. Private companies offer individual plans that may vary and not all plans include all of the features described below.

The parts of the plan have been separated into stages. As your true out of pocket (TrOOP) spending on prescription medication increases, you progress onto the next stage of drug coverage and cost sharing. During these stages you will save money in two ways. First - by what the plan pays towards your coverage and second - by the discounts you receive on your medications, which can range from 5% to 40%.

Now let’s see how it works

Every month you’ll pay a monthly premium of around $30 per month depending on the plan or about $360 per year.

Now as you start to incur medication costs. You pay for the first $295 in prescriptions out of your pocket with no assistance from the plan. This is your deductible. Even though you pay this portion out of your pocket, you may still save money on your prescriptions through the discounted prices that apply to most drugs on the formulary.

Once you have completed Stage 1 (Deductible) – you move on to Stage 2 (Co-insurance) this is where the plan starts to cover a part of your prescription costs. You pay *25% and the plan pays 75% of the $2,700 total covered in this stage.  *Percentage may vary by plan

Now in Stage 3 (Coverage Gap) you are responsible for 100% of the costs until you reach the $3,454 maximum for this stage (or total $4,350 out of pocket), but you are also accessing the drugs at reduced rates. So you are continuing to save.

You reach this stage when your true out of pocket (TrOOP) spending on medications has reached a total of $4,350. Then the coverage from the plan resumes - you only pay 5% and the plan pays 95% until the end of the calendar year for an unlimited amount of medications. Which is why it is called Catastrophic Coverage because there is no cap on the amount of coverage you can receive until the end of the calendar year.