The Deductible Phase
In the Deductible Phase, you are basically on your own until you meet that deductible assigned by the insurance plan. As of 2021, Medicare Part D deductibles, if your plan has one, cannot exceed $445. Some deductibles are lower, and some are non-existent. If you must meet one, though, it is required to pay higher prescription costs until it is met. If your plan has a $0 deductible, then you automatically advance to the Initial Phase of your Medicare Part D Drug Plan.
The Initial Phase
The Initial Phase is where “Tiers” are introduced. Once you have met your deductible, you have now entered into the Initial Phase. According to your formulary and what “Tier” your prescription drug is assigned to, will determine the new cost you must pay for your prescription. Your formulary is your list of drugs, both generic and brand name, that is covered by your prescription drug plan, which is chosen by your plan provider.
Drugs assigned to tiers one and two are typically generic, so they are cheaper than tiers three, four, and five, which are usually brand-name drugs. Some have even introduced tier six, defined as “select care drugs”, this tier can consist of costly specialty drugs. This is referred to as “Tier-based pricing.” You are responsible for tier-based pricing until you enter into the donut hole.
The Coverage Gap Phase
While most Medicare Part D enrollees do not enter The Gap Phase, or “Donut Hole,” those with expensive medications are more likely to enter this phase. As of 2021, the total amount of your drug costs must be greater than $4,130 for you to enter this phase. Once you exceed this amount, you will owe 25% of each drug cost that you purchase.
Once your True Out-Of-Pocket Costs (TrOOP) reaches $6,550, you then enter into Catastrophic Coverage.