What kinds of out of pocket costs do Medicare Part D plans have?

Last Updated : 10/06/20183 min read

If you’re like many Americans, you depend on prescription drugs to manage a physical or mental condition. Medicare Part D, available since 2006, is Medicare’s solution to prescription drug coverage. Medicare Part D is available through private insurance companies approved by Medicare with a Medicare Advantage plan with prescription drug coverage or a stand-alone Part D Prescription Plan that goes alongside Original Medicare.

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Although Medicare Part D can reduce your out-of-pocket costs for prescription drugs, it is not free. Medicare Part D out of pocket costs include premiums, deductibles, coinsurance and copayments.

What are Medicare Part D premiums?

A premium is the amount you may have to pay monthly to have Medicare Part D coverage, whether or not you fill any prescriptions. If you have a stand-alone Medicare Part D plan, you will usually pay an additional premium along with your monthly Medicare Part B premium. If you have a Medicare Advantage plan with prescription drug coverage, your Part D premium will be included in your Medicare Advantage plan premium. With a Medicare Advantage plan you also must continue to pay your Medicare Part B premium.

If your income is above a certain limit, you will pay an additional income-related amount along with Part D premium called Part D-Income-Related Monthly Adjustment Amount (IRMAA). Social Security will contact you about paying the Part D-IRMAA. If you don’t pay it, you could lose your Medicare Part D prescription drug coverage, according to the Centers for Medicare and Medicaid Services.

Keep in mind that if you have Original Medicare, a stand-alone Part D Prescription Drug Plan and Medicare Supplement (Medigap) plan, you could be paying three separate premiums for your Medicare coverage including Part B, Part D, and Medicare Supplement.

What are Medicare Part D deductibles?

A deductible represents your out of pocket costs before the Medicare Part D plan begins to pay its share. Medicare regulates how high a deductible can be. For example, your plan has a deductible of $405. You take only one prescription medication that cost $55 a month. You must pay all your costs out of pocket for seven months before you reach your deductible in month eight and the plan begins to pay for the rest of the year. Some Medicare Part D plans don’t have a deductible.

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What are Medicare Part D copayments and coinsurance?

Copayments and coinsurance are what you pay to fill a prescription once you’ve met your deductible. Copayment is a dollar amount, for example $15. If your prescription drug costs $55, you may only pay a copayment of $15. Coinsurance is a percentage, for example, 20%. If your prescription drug costs $55 and your coinsurance was 20%, you’d pay $11.

Some Medicare Part D plans have “tiers” of copayments and coinsurance with different medications on different tiers. If you take three prescription medications for example, you could pay a $10 copayment for tier one medications, a $20 copayment for tier two medications and a $30 copayment for tier three medications.

Do you have more questions about Medicare Part D?

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Benefits, premiums and/or copayments/co-insurance may change on January 1 of each year.

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