Medicare Part D Costs

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The out of pocket costs for Medicare Part D includes the initial deductible, initial coverage limit, out of pocket threshold and the coverage gap, also known as the donut hole.

Part D initial Deductible

The initial deductible for Part D is $415 in 2019 & is increasing to $435 in 2020.

Initial Coverage Limit for Part D

The initial coverage limit for Part D is $3,820 in 2019 & will be increasing to $4,020 in 2020.

Out-of-Pocket Threshold for Part D

The out-of-pocket threshold will increase from $5,100 in 2019 to $6,350 in 2020.

Coverage Gap

Coverage Gap (donut hole) 
begins once you reach your Medicare Part D costs plan’s initial coverage limit and ends when you spend a total of $6,350 in 2020. 
In 2020, Part D enrollees will receive a 75% discount on the total cost of their brand-name drugs purchased while in the donut hole. The 75% discount paid by the brand-name drug manufacturer will apply to get out of the donut hole.

For example: if you reach the donut hole and purchase a brand-name medication with a retail cost of $100, you will pay $25 for the medication, and receive $95 credit toward meeting your total out-of-pocket spending limit.

Click to View Below Chart Comparing 2014-2020 Standard Benefit Model Plan Features

Medicare Part D Benefit Parameters for Defined Standard Benefit
2014 through 2020 Comparison
Part D Standard Benefit Design Parameters: 2020 2019 2018 2017 2016 2015 2014
Deductible ‐ (after the Deductible is met, Beneficiary pays 25% of covered costs up to total prescription costs meeting the Initial Coverage Limit. $435 $415 $405 $400 $360 $320 $310
Initial Coverage Limit ‐ Coverage Gap (Donut Hole) begins at this point. (The Beneficiary pays 100% of their prescription costs up to the Out-of-Pocket Threshold) $4,020 $3,820 $3,750 $3,700 $3,310 $2,960 $2,850
Out-of-Pocket Threshold ‐ This is the Total Out-of-Pocket Costs including the Donut Hole. $6,350 $5,100 $5,000 $4,950 $4,850 $4,700 $4,550
Total Covered Part D Drug Out-of-Pocket Spending including the Coverage Gap ‐ for Persons Qualifying For LIS ‐ and are not eligible for the donut hole discount.
Catastrophic Coverage starts after this point. See note (1) below.
$9,038.75 (1) $7,653.75 (1) $7,508.75 (1) $7,425.00 (1) $7,062.50 (1) $6,680.00 (1) $6,455.00 (1)
Total Estimated Covered Medicare Part D costs Drug Out-of-Pocket Spending including the Coverage Gap Discount (NON-LIS) See note (2). $9,719.38 $8,139.54 $8,417.60 $8,071.16 $7,515.22 $7,061.76 $6,690.77
Average NON-LIS percentage brand and generic drug purchases made during the coverage gap used to estimate the Total Covered Part D OOP threshold for NON-LIS beneficiaries (see above). Brand: 90.18%
Generic: 9.82%
Brand: 89.18%
Generic: 10.82%
Brand: 87.9%
Generic: 12.1%
Brand: 84.6%
Generic: 15.4%
Brand: 85.9%
Generic: 14.1%
Brand: 86.2%
Generic: 13.2%
Catastrophic Coverage Benefit:
Multi-Source Drug
$3.60 $3.40 $3.35 $3.30 $2.95 $2.65 $2.55
    Other Drugs (3) $8.95 $8.50 $8.35 $8.25 $7.40 $6.60 $6.35
Part D Full Benefit Dual Eligible (FBDE) Parameters: 2020 2019 2018 2017 2016 2015 2014
   Deductible $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
   Copayments for
$0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Maximum Copayments for Non-Institutionalized Beneficiaries
    Up to or at 100% FPL:
        Up to Out-of-Pocket Threshold
Multi-Source Drug
$1.30 $1.25 $1.25 $1.20 $1.20 $1.20 $1.20
      Other $3.90 $3.80 $3.70 $3.70 $3.60 $3.60 $3.60
     Above Out-of-Pocket
$0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
    Over 100% FPL:
        Up to Out-of-Pocket Threshold
Multi-Source Drug
$3.60 $3.40 $3.35 $3.30 $2.95 $2.65 $2.55
      Other $8.95 $8.50 $8.35 $8.25 $7.40 $6.60 $6.35
     Above Out-of-Pocket
$0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Part D Full Subsidy ‐ Non-Full Benefit Dual Eligible Full Subsidy Parameters: 2020 2019 2018 2017 2016 2015 2014
Eligible for QMB/SLMB/QI, SSI or applied an income at or below 135% FPL and resources < $9,230 (individuals) or < $14,600 (couples) (4)
   Deductible $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
    Maximum Copayments up to Out-of-Pocket Threshold
Multi-Source Drug
$3.60 $3.40 $3.35 $3.30 $2.95 $2.65 $2.55
      Other $8.95 $8.50 $8.35 $8.25 $7.40 $6.60 $6.35
   Maximum Copay above
$0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Partial Subsidy Parameters: 2020 2019 2018 2015 2016 2015 2014
Applied and income below 150% FPL and resources between $14,390 (individuals) or $28,720 (couples) (category code 4) (4)
   Deductible $89.00 $85.00 $83.00 $82.00 $74.00 $66.00 $63.00
   Coinsurance up to
15% 15% 15% 15% 15% 15% 15%
    Maximum Copayments above Out-of-Pocket Threshold
Multi-Source Drug
$3.60 $3.40 $3.35 $3.30 $2.95 $2.65 $2.55
      Other $8.95 $8.50 $8.35 $8.25 $7.40 $6.60 $6.35
Retiree Drug Subsidy Amounts: 2020 2019 2018 2017 2016 2015 2014
      Cost Threshold $435 $415 $405 $400 $360 $320 $310
      Cost Limit $8,350 $8,250 $7,400 $6,600 $6,350
(1) Total Covered Medicare Part D costs Spending at Out-of-Pocket Threshold for Non-Applicable Beneficiaries ‐ Beneficiaries who ARE entitled to an income-related subsidy under section 1860D-14(a) (LIS)
(2) Total Covered Medicare Part D costs Spending at Out-of-Pocket Threshold for Applicable Beneficiaries ‐ Beneficiaries who are NOT entitled to an income-related subsidy under section 1860D-14(a) (NON-LIS) and do receive the coverage gap discount. For 2020, the weighted gap coinsurance factor is 88.0579%. This is based on the 2018 PDEs (90.18% Brands & 9.82% Generics)
(3) The Catastrophic Coverage is the greater of 5% or the values shown in the chart above. In 2020, beneficiaries will be charged $3.60 for those generic or preferred multisource drugs with a retail price under $72 and 5% for those with a retail price greater than $72. As to Brand drugs, beneficiaries would pay $8.95 for those drugs with a retail price under $179 and 5% for those with a retail price over $179.
(4) The actual amount of resources allowable may be updated for the contract year 2020.


Medicare prescription drug costs vary by policy, based on the list of covered drugs, also known as the plan’s formulary. Policies that cover prescription drugs usually put covered drugs into cost tiers, with individual cost-sharing for the medications on each tier.

Medicare Drug Costs

Legislators are working hard with Medicare to lower the premium and other costs that come with Part D. Also, having more pharmacy options as well as prescription options available to beneficiaries.

Medications that fall on the higher tiers attract higher coinsurance costs and co-payments compared to those on the lower tiers. Private insurers set their own premiums, so it pays to compare plans in your area to make sure that you’re choosing the right plan for your prescription drug needs

Keep in mind, Medicare prescription drug policies and Medicare Advantage drug plans vary in terms of the particular medications they cover as well as the costs the beneficiary pays. This is despite the prescription drugs being the same.

Medicare drug costs depend on:

  • The medications you take, and how frequently you take them
  • Whether the pharmacy you go to is within the network of your plan
  • Your medications are on your Part D’s formulary
  • Whether you have chosen the stand-alone Part D Medicare Prescription Drug policy or the Medicare Advantage Drug Plan
  • If you receive extra help paying your Part D Medicare costs

One major cost that you should consider is the monthly premium. Stand-alone Part D policies and Medicare Advantage policies have a monthly premium. Other than the monthly premiums, you may have to pay an annual deductible and a co-payment/coinsurance.

Average Monthly Part D Premiums

Part D Premium Income Brackets

For 2019, your additional premium based on income is as follows:
Individual Annual Income Couples Annual Income What you pay in addition to your regular Part D premium
Equal to or below $85,000 Equal to or below $170,000 $0
$85,001 – $107,000 $170,001 – $214,000 $12.40
$107,001 – $133,500 $214,001 – $267,000 $31.90
$133,501 – $160,000 $267,001 – $320,000 $51.40
$160,001 – $499,999 $320,001 – $749,999 $70.90
$500,000 and above $750,000 and above $77.90

Medicare Part D Formulary

As mentioned above, each drug policy has its formulary. As a beneficiary, it’s good to check your plan’s formulary to confirm if your drugs are covered. Call our advisors for more information on this! Below are a few examples of what prescriptions are & are not covered.

Covered Prescriptions:

  • Certain vaccines
  • Insulin and all the equipment associated with insulin injection (needles, gauze, syringes, and alcohol swabs)
  • Barbiturates
  • Benzodiazepines
  • Prenatal vitamins

Not Covered Prescriptions:

  • Drugs for cosmetic purposes
  • Medicines for anorexia, weight gain or weight loss
  • Drugs meant to relieve colds and coughs
  • Medications for erectile dysfunction
  • Individual outpatient drugs
  • Over-the-counter medications
  • Minerals or vitamin drugs except those noted in the formulary
  • Fertility drugs

Formulary Tiers

The same formulary drug tier definitions are used on 95% of stand-alone Medicare PDPs and 76% of MAPDs. Also, Medicare plans use these tiers to organize covered prescriptions into cost-sharing groups. Even though these drug plans use the same 5-Tier formulary, each PDP insurance plan individually determines which medications will be placed into what tier groups.

  1. Preferred Generic
  2. Generic
  3. Preferred Brand
  4. Non-Preferred Drug
  5. Specialty Tier

How to Pay for Medicare Part D

Prescription Drug Plans typically charge fees every month. The monthly premiums can be an automatic deduction from your Social Security Benefits payment.

The first premium deduction takes about three months to start, at which point three months-worth of premiums will automatically be withdrawn. After your three-month premiums are paid, one premium per month will be withdrawn.

You may also select to get billed directly if that works best for you.

Some beneficiaries may find that they must pay for a Part D monthly adjustment amount based on their income (Part D IRMAA). This is due to monthly gross income is above a certain amount.

This payment is in addition to the Part D premium payment. Unlike the Part D payment, however, this payment is made directly to Medicare and not your health plan.

How will you know if you’re required to make this additional payment? Social Security will contact you if it’s found that you’re deemed to pay this fee.

This fee can be automatically deducted from your Social Security, or you’ll get a bill.

How to Make Late Payments

If you’re late or have missed a payment for your Part D prescription plan, there may be a few options available to you. Medicare has certain rules when it comes to late and missed payments, however, it’ll be up to your plan to choose how they proceed.

These are Medicare’s rules for late payments of Part D premiums:

  • You can still receive coverage without penalties
  • You’re granted a grace period and warning
  • You receive a letter informing you to contact your plan for resolution

You must receive notification before a plan can drop you from your coverage. Grace periods can be granted and must be at least two months but can be more depending on which plan you have. The grace periods begin on day one that your premium hasn’t been paid.

The Plan Disenrolls You

Single Grace Period – When there’s been at least one payment that’s been unpaid during your grace period, your health plan can end your coverage at the end of the timeframe allotted.

Rollover Grace Period – If you’re behind on more than one premium payment but can pay a minimum of one payment owed during this grace period, the period will end. Your plan will then notify you of your new grace period to pay other premiums owed.

This will happen until allowed payments are paid off. If you fail to make a premium payment during this point, your plan can drop your coverage.

Can My Prescription be Moved to a Lower Cost Tier Group

If one or more of your prescriptions have been moved to a formulary tier that is more expensive, you may be able to contact your plan carrier and ask them to move your prescription to a lower cost tier.

My Medications Co-Payment is Higher than Retail Cost, Will I Pay More if I Use My Medicare PDP

No, between you’re planning co-pay and retail drug cost, you’ll always pay the lesser of the two. However, if the plans co-pay for your medication is $39 but the negotiated retail cost is $15, you’ll only have to pay the retail cost.

What is the Coverage Gap

Also called the Medicare donut hole, the coverage gap is a short-term limit on what your prescription plan will pay for the covered prescription medications. Every Medicare policy that covers prescription drugs has one, but not everyone enters it.

The probability of you reaching the gap will depend on the particular drugs you take, their costs, dosages, and whether they are generic or brand-name drugs.

You’ll enter the donut hole when you and your plan have spent a specified amount on the covered prescription medications, including the deductible in case your plan has one.

While in the gap, you’ll be responsible for most of the expenses resulting from your prescription drugs until you reach a certain out-of-pocket amount, then catastrophic plan coverage starts, and you’ll be out of the gap.

What Happens if I Cannot Afford my Prescription Medications

Medicare provides a program known as Extra Help or Low-income Subsidy, to qualified individuals with low incomes. If you’re a member of Medicare and meet the requirements of the program, you may qualify for the “Extra Help.” Those who qualify will get help paying for their Medicare Part D expenses which may include cost-sharing, deductibles, and premiums.

You can qualify for the Extra Help if:

  • Acquire Supplemental Security Income benefits
  • Qualify for Medicare and receive full coverage from a government Medicaid program
  • You’re a member of a Medicare Savings Program