Nearly one in four older adults say it’s difficult to afford their prescription medications. This is especially true for those in fair or poor health and those with low incomes. Medicare Part D prescription drug coverage can help.
When you have a standalone Medicare Part D prescription drug plan or a Medicare Advantage (Medicare Part C) plan that includes Part D drug coverage, you also have what’s called a true out-of-pocket limit (otherwise known as TrOOP). TrOOP is important because it regulates the amount you’ll spend through your drug plan each year. Understanding how TrOOP works can help you plan ahead financially and give you peace of mind.
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The TrOOP limit is the point at which your Medicare Part D catastrophic coverage begins. With catastrophic coverage, you only pay a small copayment for covered drugs. In 2022, the amount necessary to meet the TrOOP threshold is $7,050, a $500 increase from what the limit was in 2021.
With Medicare Part D, you’ll move through various coverage phases during which you’ll owe different amounts for your prescription drugs. TrOOP ultimately helps limit those payments, making it easier for you to afford your medications and take them as prescribed.
In the first Part D coverage state, you’ll typically pay 100% of your prescription drugs costs until you meet your Medicare Part D deductible. This amount varies from plan to plan but cannot be more than $480 in 2022. In fact, some plans may feature $0 drug deductibles.
Once you meet your plan’s deductible, you’ll pay a copayment or coinsurance for your covered drugs, and Medicare Part D pays for rest for prescription drugs included on your plan’s formulary (list of covered medications).
After you and your Medicare Part D plan have jointly spent $4,430 (your 2022 Medicare Part D initial coverage limit), you’ll enter a coverage gap sometimes known as the Donut Hole. During this gap, you’ll pay 25% of the cost for brand-name drugs. The drug manufacturer gives you a 70% discount, and your Medicare Part D plan pays the remaining 5%. The good news is that the 25% you pay along with the 70% the manufacturer pays and the 5% your plan pays all count toward your TrOOP.
For generic drugs you purchase during the coverage gap, you’ll pay 25%, and your Medicare Part D plan covers the other 75%. However, only the portion you pay yourself counts toward your TrOOP.
After your total out-of-pocket expenses on prescription drugs reaches $7,050, you move into the Part D catastrophic coverage phase. When January 1 comes along, your Medicare Part D plan resets, and you’ll move through each of these phases again.
The biggest expenses you’ll pay that count toward TrOOP are your annual deductible, coinsurance costs and copayments. However, in some cases, TrOOP also includes payments made by drug manufacturers and your Medicare Part D plan.
In addition, TrOOP includes payments made through the Medicare Extra Help program or by Indian Health Service, AIDS drug assistance programs, most charities and most State Pharmaceutical Assistance Programs. Therefore, it makes sense to explore what resources and options are available to you because the amounts paid can help offset the costs you pay directly.
Medicare Part D premium payments and pharmacy dispensing fees don’t count toward your TrOOP limit. TrOOP also doesn’t include what you pay for drugs that aren’t covered by your plan (unless you’re able to receive a formulary exception) as well as payments made for your drugs by employer or union health plans, TRICARE, VA, Worker’s Compensation, and some other programs.
As stated above, you also don’t get credit for generic drug costs that your Medicare Part D plan pays during the Donut Hole.
There are various proactive steps you can take to help you afford the cost of your prescription medications. For example, you can switch from generic medications to other lower-cost drugs or choose a Medicare drug plan with additional coverage during the Donut Hole.
You can also apply for the Medicare Extra Help program that provides help to people with limited income and resources. Other resources include State Pharmaceutical Assistance Programs and Pharmaceutical Assistance Programs that pharmaceutical companies provide.
You can also review local prescription drug assistance programs. And a licensed insurance agent can help you compare your Medicare prescription drug plan options so you can find a plan that covers your drugs and meets your budget needs.
Speak with a licensed insurance agent
Lisa Eramo is an independent health care writer whose work appears in the Journal of the American Health Information Management Association, Healthcare Financial Management Association, For The Record Magazine, Medical Economics, Medscape and more.
Lisa studied creative writing at Hamilton College and obtained a master’s degree in journalism from Northeastern University. She is a member of the American Health Information Management Association, American Academy of Professional Coders, Society of Professional Journalists, Association of Health Care Journalists and the American Society of Journalists and Authors.
Lisa currently resides in Cranston, Rhode Island with her wife and two-year-old twin boys.
LinkedIn: Lisa Eramo