New proposed changes have been announced for Medicare Part D prescription drug coverage in 2020. Many beneficiaries are in the process of figuring out how this will impact them.
Prescription drug expenses can be a drain on Medicare recipients monthly income. Drugs that are essential to keeping you healthy, functioning and active can be prohibitively expensive.
Medicare Part D prescription coverage is designed to help alleviate some of the financial challenges beneficiaries face when paying for medication. Part D changes for 2020 address these issues.
Medicare Part D Premiums Declined in 2019
The average basic premium for Medicare Part D prescription drug plans saw a decrease in 2019. Lowering drug premiums continues to be a priority for CMS.
CMS reports the premiums to go from $33.59 in 2019 to $30 next year.
Medicare Part D Premiums Continue to Decline in 2020
Premiums have declined over the last 3 years by about 13.5%. In 2017, premiums were about 34.70 and in 2020 about $30. This saves beneficiaries approximately $1.9 billion in premium costs over time.
Lower premiums have made the program more accessible, there has been an increase of about 12.2 percent since 2017.
Since the premiums average is decreasing, the late enrollment penalties will decrease. This means beneficiaries that were without creditable prescriptions drug coverage for at least 63 days won’t have an increase in their penalty.
The late enrollment penalty is added to the monthly premium amount on your drug plan.
2020 Changes for Medicare Part D Prescription Drug Plans
CMS works hard to make positive changes to the Medicare program. They have implemented prohibiting “gag clauses”; so, now pharmacists can tell patients about lower costing ways to obtain medications. Also, CMS requires an Explanation of Benefits to be sent to beneficiaries monthly; this information would include drug price increases as well as lower-costing therapeutic alternative options.
Additionally, CMS has reduced the maximum amount that low-income beneficiaries pay for innovative medications or “biosimilars”. Medicare has increased competition among plans by requiring certain Part D plans to have a meaningful difference from each other; this makes more plan options for beneficiaries.
CMS usually releases the information on plans by mid to late September.
Standard Initial Deductible for Medicare Part D in 2019
The proposed coverage changes include a slight increase in the initial deductible for prescriptions. The 2019 amount of $415 will go up to $435, a jump of $20. The initial deductible goes towards your out of pocket threshold (TrOOP), or when you leave the Donut Hole and move into Catastrophic Coverage.
The initial deductible is the amount you will pay before Medicare Part D begins to pay its share. The amount in 2020 is $435, but that doesn’t affect when you enter the Donut Hole portion of the Medicare Part D coverage (after expenses of $4,020). It does impact when you leave the Donut Hole and go to Catastrophic Care coverage.
Initial Coverage Limit for 2020 Medicare Prescription Drug Plans
The proposed changes to the initial coverage limit, or ICL, in 2020 is said to increase to $4,020, up from $3,820 from 2019. The donut hole entry point is set by the initial coverage limit. This means you’ll be able to spend a little more on your medications prior to reaching the donut hole in 2020.
Total Out of Pocket Threshold (TrOOP) for Medicare Part D in 2019
Catastrophic coverage begins after the Medicare Part D enrollee reaches the TrOOP threshold of $6,350 during one calendar year. The TrOOP is the amount a beneficiary must spend to exit the donut hole and enter into the Medicare Part D Catastrophic phase.
Proposed changes to Medicare Part D coverage will impact the Donut Hole, otherwise known as the coverage gap. The coverage gap is the amount between when Medicare recipients reach their threshold of coverage and when they begin to receive Catastrophic Coverage.
The Donut Hole Brand Name Drug Discount will Increase
Part D enrollees paid 30% of the cost in 2019. Now, for 2020, beneficiaries will only pay 25% of brand name drug costs.
Brand-name drug manufacturers cover 50% of the costs in the coverage gap; in 2019, plans covered 20% of the cost and in 2020, the plans cover 25% of the costs.
The drug plans must cover an additional 5% in 2020 that they didn’t cover in 2019. These savings will trickle down to beneficiaries.
Companies making brand-name medications are required to sign medicare agreements to participate in the Medicare Coverage Gap Discount Program. Even though there is a discount, the entire cost of the drug will count towards the catastrophic coverage phase.
The Donut Hole Generic Drug Discount will Increase
If you reach the Donut Hole or coverage gap period, the generic drug discount will increase from 63% in 2019 to 75% in 2020. Your costs for generic drugs while in the donut hole will be 25% of the retail price of the drugs.
In 2019, the drug plan covered 63%, and beneficiaries covered 37% of the cost of drugs in the donut hole. Then, for 2020, the plans must pay 75% instead of the previous 63%. This means beneficiaries will only pay 25% of cost instead of 37%.
Example of Part D Expenses that will Enter the Donut Hole
If a Medicare Part D enrollee has $800 per month in brand-name prescription medications to purchase, that will amount to $2,666.83 annually. This is based on $9,719.38 in total annual purchases.
This total includes five months of initial prescription plan coverage, six months of Donut Hole coverage and one month of Catastrophic Coverage. The average monthly cost will be $229.42, or 25% of the total cost of annual prescriptions.
Compare Medicare Part D Plans for 2020
If you’re unsure about what your prescription drug expenses will be in 2020, and would like an estimate of how much you’ll spend based on your current medical needs, you can use this Part D plan finder.