Part D-Prescription Drug Plans

Overview of Part D Plans

Medicare Part D is offered through private insurance companies with a standard minimum plan design mandated by Medicare. Each plan has these common attributes:

• A formulary of covered drugs
• Drugs segregated into tiers
• Preferred pharmacy network (retail and mail order)
• Flexibility to change plans annually (10/15 – 12/7)
• No limit to cost sharing paid by individual
• No coverage when traveling outside the U.S.

Phases of Medicare Part D Cost Sharing

• Deductible Phase: The maximum deductible you may be charged is determined each year by Medicare. However, an insurance company offering a Part D Prescription drug plan is not required to charge a deductible. The plan may have a no deductible for all drugs, a deductible lower than the Medicare maximum, or different deductibles for drugs on different tiers.
• Initial Coverage Phase: The maximum cost share for an individual is 25% of a drug's cost. However, an insurance company may require a lower cost share for all drugs and depending on drug tier. This phase ends when total costs paid by the individual and the insurance company reach an annual maximum determined by Medicare.
• Middle Coverage Phase (formerly the Coverage Gap or "Donut Hole"): In this phase, the individual cost share of the drug is determined by different criteria depending on whether its a generic drug or a brand drug. This phase ends when total costs paid by the individual and the insurance company reach an annual maximum determined by Medicare.
  NOTE: We have decided to call it the "Middle" Coverage phase since the naming convention has never been updated since the Coverage Gap, informally called the "donut hole,"  was eliminated in 2020.
• Catastrophic Coverage Phase: When an individual enters this phase, the individual cost share of each drug is limited to the greater of 5% of the drug cost or a flat copay depending on whether its a generic drug or brand drug. The individual remains in this phase for the remainder of the calendar year.

The National Council on Aging (NCOA) has developed an informative chart detailing the phases for Part D prescription drug coverage. If you would like a more detailed overview with specific maximums for the current calendar, review the NCOA Part D Cost Sharing Chart.

For additional information, you can download a copy of the Medicare and You Handbook. It is updated annually and available in a number of different formats and languages.

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