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Part D Plan Costs — Premiums & the Donut Hole

Medicare Part D prescription drug plans usually are not free. If you have Part D coverage, you may have to pay premiums, "donut hole" drug costs, and other out-of-pocket costs like deductibles.

Your Part D plan premiums will depend on the type of plan you enroll in and the insurance company you choose. The average Part D plan premium is projected to be $42.17 in 2017, according a Kaiser Family Foundation (KFF) report.

You also may have to pay out-of-pocket costs before using your Part D coverage. Some Medicare Part D plans come with a deductible of up to $400 in 2017, which you may have to meet before your plan covers anything, according to the KFF report. In addition to that, your plan may charge you co-insurance or a co-payment for filling individual prescriptions.

The "donut hole" is another source of Part D plan costs. It is a coverage gap that you may fall into if you and your plan spend over a certain amount on your drugs during a calendar year. While in the donut hole, you may have to pay higher out-of-pocket costs for prescription drugs.

Income-related adjustment

If your yearly income is above a certain level, you must pay a monthly adjustment amount in addition to your plan premium. This is called a Part D income-related monthly adjustment amount (Part D-IRMAA).

You must pay the Part D-IRMAA directly to Medicare, not your Part D plan provider, according to Medicare.gov. Most people have the extra amount removed from their Social Security checks.

Your monthly adjustment is based off your tax returns from 2 years ago. The chart below from Medicare.gov shows the details for 2017:

If you file an individual tax return If you file a joint tax return If you file a married & separate tax return Your 2015 monthly costs
$85,000 or less $170,000 or less $85,000 or less Your Part D plan premium
$85,000 - $107,000 $170,000 - $214,000 N/A $13.30 + your Part D plan premium
$107,000 - $160,000 $214,000 - $320,000 N/A $34.20 + your Part D plan premium
$160,000 - $214,000 $320,000 - $428,000 $85,000 - $129,000 $55.20 + your Part D plan premium
Above $214,000 Above $428,000 Above $129,000 $76.20 + your Part D plan premium

Late enrollment penalty

If you wait to enroll in a Part D plan, you may face a late enrollment penalty, according to Medicare.gov. This may apply if you miss your Initial Enrollment Period (IEP) and have a period of 63 days or more in a row when you do not have Part D coverage or another form of creditable prescription drug coverage.

Your late enrollment penalty amount depends on how long you went without creditable prescription drug coverage after you became eligible for Medicare.

Your Medicare Part D plan will notify you if you owe a penalty. If you do, you may have to pay this penalty for as long as you have Part D coverage.

Medicare.gov provides more information about how to calculate your late enrollment penalty.

Out-of-pocket costs

Part D plans have several out-of-pocket costs including yearly deductibles, co-payments, and co-insurance, according to Medicare.gov.

Part D yearly deductibles are the amount you must pay before your plan starts covering its portion of prescription medication. Each Part D plan may have a different deductible, and some plans have no deductible. In 2017, about 62% all Part D plans have a deductible, according to KFF.

For 2017, the Medicare program caps Part D yearly deductibles at $400, according to KFF.

Part D co-payments and co-insurance are the amount you pay for each prescription drug after you have met your yearly deductible.

A co-payment is a set amount for all prescription drugs in a specific formulary tier. For example, a Tier 1 prescription drug may have a $10 co-payment.

Co-insurance is a payment based on a percentage of the drug’s total cost. For example, if your co-insurance is 20%, a $25 drug would cost you $5.

The pharmacy you use may affect your Part D plan’s co-payments and co-insurance depending on whether it is an in-network pharmacy. Our Part D benefits page has more information about network pharmacies.

The "donut hole"

Most Part D plans have a temporary coverage gap, which is often called the "donut hole". A donut hole is a period where you have to pay higher out-of-pocket costs for your prescription drugs.

This coverage gap starts once you and your Part D plan have spent a certain amount on your covered prescription drugs for the year. In 2017, this amount is $3,700.

Once you reach the donut hole, you will pay a certain percentage of the Part D plan’s cost for covered drugs. If you enter the donut hole in 2017, you will pay 40% of the cost of brand name drugs and 51% of the cost of generic drugs while in the coverage gap.

The percentage you have to pay while in the donut hole will gradually decrease every year until 2020 according to Medicare.gov.

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This information is not a complete description of benefits. Contact the plan for more information. Limitations, copayments and restrictions may apply. Benefits, premiums and/or member cost-share may change on January 1 of each year.

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Last Updated: 09/12/2017 Pending Accepted

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