Every year the Centers for Medicare & Medicaid Services announces the new thresholds for Part D for the following year. It’s Medicare, not the insurance companies, that sets these parameters. This year the news is good for people who fall into the coverage gap.
Here are the 4 Stages for Medicare Part D 2020:
Medicare Part D 2020 Deductible: $435
This represents a $20 increase from the 2019 deductible. After the deductible is met, you then enter the initial coverage stage where you will pay just the co-pays associated with each medication based on their Tier.
These prices continue until someone reaches the initial coverage limit.
Initial Coverage Limit for 2020: $4,020
Once your total cost of drugs reaches $4,020 for the year, you will enter the coverage gap. It’s important to realize that this amount is made up of your spending AND the insurance company’s spending. So if you take a drug that costs your Medicare Part D carrier $200 to buy, but you pay only a $40 copay, it’s the whole $200 that gets counted toward your initial coverage limit.
Your insurance company will send you a monthly statement that shows you these amounts so that you can know ahead of time if you are getting close to the gap.
Medicare Part D 2020 Coverage Gap (also known as Donut Hole)
Once you reach the Part D 2020 coverage gap, the cost of your generic medications and brand-name drugs will be limited to a 25% coinsurance. This coinsurance may be less, the same, or more than what you were paying prior to the donut hole.
Hitting the gap and seeing an increase in the cost of your medications is never fun. However, keep these things in mind:
- The insurance company is always paying the larger share of the cost. You pay only up to 25% of your medications in the gap.
- Occasionally hitting the coverage makes the cost of your medication go down from what you were paying before the gap. This is often true on generic medications. It happens because many Part D insurance companies offer better benefits than what the standard Part D model requires.
- The discounts you get from the Part D carrier while you are in the gap apply toward your True Out of Pocket, making you eligible for catastrophic coverage sooner. While you are in the gap, the manufacturers drug discounts are tallied and apply toward your out-of-pocket total.
Catastrophic Coverage Limit (also known as your True Out of Pocket): $6,350
Medicare built in a catastrophic limit to protect in years when your drug spending is high. If you reach the limit of $6,350 out of pocket, then after that point, you will pay only 5% of the cost of your drugs for the remainder of the year. Many people don’t realize this, but the discounts given by the insurance company in the gap DO count toward the $6,350. This helps you more quickly reach he Catastrophic Coverage level where you can get rate relief.
Remember that these limits are just the minimum acceptable standard set by Medicare. Part D insurance companies can improve upon these in their plan designs if they choose. For example, this year some companies offered co-pays for generics in the gap, which is considered an upgrade. That’s why it’s important to shop your plan using Medicare Drug Finder tool each and every year. You’ll want to find out which plan is most cost effective for you the following year. The tool provides analysis of your Part D costs for both standalone plans and Medicare Advantage plans.
People with certain low incomes can also apply for the Low Income Subsidy to help them with the cost of their medications.
Lower Drug Costs in 2020
Under the Affordable Care Act, your savings on drugs in the gap will increase incrementally. However, the donut hole has improved since 2019.
- 2019: You paid 25% of the cost of your brand-name drugs. You paid 37% of the cost of your generics.
- 2020: You pay only 25% of the cost of all your medications, brand and generic
As an agency with thousands of clients all across America, we know that drug spending is one of the most common pain points for Medicare beneficiaries. Be sure to read our article about the ways to lower your prescription drug costs here. You can also visit Medicare’s site for additional Part D 2020 details.
Compare Medicare Drug Plans for 2020
Also if you enroll in your Medigap plan through our agency, we will also help you with your initial Part D plan set up. Each year after that, you can use our instructional video to compare Part D plans using Medicare’s Plan Finder Tool.
Editor’s Note: This post was has been updated and republished for 2020.