Understanding the Medicare Drug Plans (Part D)
Medicare Part D is the most extensive drug insurance plan in the United States. There are about 43 million Americans currently enrolled and receiving benefits in the Medicare Drug Benefit Program or Medicare Part D.
Medicare Part D is a voluntary outpatient benefit offered by private health insurance plans which are approved by the federal government. Part D plans are not administered or paid for by the Federal Government.
Medicare Part D plans are designed to assist people who have Medicare Coverage in affording their prescription medications.
However, we are seeing that for people with complex and severe health conditions, like cancers, who depend on high-cost drugs, affording their medications even when they have Medicare Part D benefits, is becoming more difficult.
There are different payment phases or stages that a person will go through when they utilize their Medicare Part D benefits to pay for their prescription medications. Below is an explanation of these phases.
Different Part D plans do have differences, but all Part D plans have the following payment phase commonalities:
A Monthly Premium – The premium will vary in cost by the plan selected (averaging $33.19/month in 2019). These premiums must be timely paid each month to maintain coverage.
An Annual Deductible – The deductible will vary depending upon the plan selected (but cannot exceed $415/year in 2019). The annual deductible must be paid in full by the beneficiary before any of the Part D Plan covers any costs of any prescription drugs.
The Initial Coverage Phase – This phase begins after the beneficiary has paid their full annual deductible. Once the beneficiary has paid their deductible, the Part D Plan’s obligation to cover its share begins. This share will vary depending upon the plan selected.
Coverage Gap Phase (aka as the Doughnut Hole) – The dreaded Doughnut Hole begins after the beneficiary and the Part D plan have paid a combined pre-determined amount for prescription drugs ($3820 in 2019). One this amount has been paid, it triggers a phase where the beneficiary is obligated to pay the entire amount of the prescription drug costs.
The Catastrophic Phase – The good news is that eventually, a beneficiary will pass through the doughnut hole by having paid a pre-determined amount of out-of-pocket costs ($5100 in 2019) for their prescription drugs. Paying this pre-determined amount triggers a reduced beneficiary cost-sharing obligations for the remainder of the coverage period (in 2019, either 5% of the cost for each prescription medication, or $3.40 for each generic drug and $8.50 in for each brand-name drug, whichever is greater).
Comments on the Catastrophic Phase of Medicare Part D
Increasingly, because of the high cost of drugs, including cancer drugs, we are seeing that more and more individuals are having out-of-pocket prescription drug costs that exceed the $5100 threshold, sometimes even early in the calendar year. When this happens, a beneficiary enters the Catastrophic Phase of Medicare Part D. What does this mean, and why is it important?
1. Once in the Catastrophic Phase, a beneficiary pays 5% of the cost for each prescription medication, or $3.40 for each generic drug and $8.50 for each brand name drug, whichever is greater;
2. This payment obligation continues for the remainder of the calendar year;
3. There is currently no cap or limit on the amount a beneficiary pays out-of-pocket annually in the Catastrophic Phase.
The 5% beneficiary cost-sharing in the Catastrophic Phase is the lowest cost-sharing percentage in Medicare Part D. It is intended to minimize the cost burden on beneficiaries who have already incurred high out-of-pocket drug costs in any given calendar year.
However, unlike commercial insurance plans, Medicare Part D does not cap or limit a beneficiary’s total out-of-pocket prescription drug costs in a calendar year. Even being obligated to pay a small portion of the drug costs, the failure of Medicare Part D to have any out of pocket total annual cap can be devastating for many individuals.
Out-of-Pocket Cap in Medicare Part D
Medicare Part D needs to include a total out-of-pocket cap for prescription drug costs. Without this protection, beneficiaries too often find that their drugs become unaffordable. People with serious illnesses, including cancer, need to know that they can focus on improving their health while avoiding prescription drug price financial toxicity.
