2020 Part D Coverage Parameters

Each year, the Centers for Medicare and Medicaid Services (CMS) adjusts the cost sharing limits for the standard Medicare Part D plan. Earlier this month, CMS announced the adjustments for 2020. Below is a summary of the adjustments for next year:

Deductible: $435 (a $20 increase from 2019)

• This is the amount a Medicare beneficiary must pay for prescription drugs before coverage under the Part D plan begins.

Initial Coverage Limit: $4,020 (a $200 increase from 2019)

• After the deductible, the Part D plan will provide coverage for prescriptions subject to copays or coinsurance. This coverage is provided up until the Medicare beneficiary has incurred $4,020 of prescription drug expenses (based on the total cost of prescription drug expenses paid by the Medicare beneficiary and the plan).
• Medicare beneficiaries should expect to incur $896.25 of out-of-pocket expenses after the deductible and until the initial coverage limit is reached.
• Once the initial coverage limit is met, you are said to have reached the “donut hole” entry point.

Donut Hole (Coverage Gap): Begins after $4,020 of prescription drug expenses have been incurred.

• In the past, it was as if there was another deductible that had to be met. However, the Affordable Care Act (ACA) closed this so-called donut hole. In 2020, there will be a 75% discount provided for generic and brand name medications purchased during the donut hole, up until the out-of-pocket limit.
• For generic drugs, only the cost the Medicare beneficiary pays applies to the out-of-pocket limit. This will be 25% of the generic drug cost. So, if a generic drug had a retail price of $100, the Medicare beneficiary will pay $25 to fill their prescription, and $25 will be applied towards their out-of-pocket limit.
• For brand name drugs, the Medicare beneficiary will only pay 25% of the drug expense, but they will have 95% of the cost of the drug applied towards their out-of-pocket limit. So, if a brand name drug had a retail price of $100, the Medicare beneficiary will pay $25 to fill their prescription, but $95 will be applied towards their out-of-pocket limit.

Out-of-Pocket Limit: $6,350 (an increase of $1,250 from 2019)

• This is the maximum amount of out-of-pocket expenses a Medicare beneficiary will have to pay prior to reaching their catastrophic coverage benefit.

Catastrophic Coverage: Small copays are required after the out-of-pocket limit has been met.

• $3.60 for generic drugs (a $.20 increase from 2019)
• $8.95 for brand name drugs (a $.45 increase from 2019)