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Understanding Medicare Part D Coverage Gap

Kevin Wenke

Kevin Wenke

CFP | CLU | Investing | Insurance | Taxes

Medicare Part D and coverage gaps?

Medicare Part D is prescription drug coverage for Medicare recipients. It can be purchased as a stand-alone insurance plan for those who chose the path of Original Medicare or be incorporated into a Medicare Advantage Plan

Medicare Part D is optional coverage. If you do need drug coverage in retirement, then understanding the coverage gaps these plans have is important to prevent unnecessary expenses.

Medicare Part D Gaps for 2020

  • The standard deductible in Medicare Part D will increase from $415 to $435. This is paid by the enrollee before any coverage is provided.
  • The average monthly premium for a standard Part D drug plan is $32.70, a decrease of 45¢. Although it’s likely no drug plan will have this premium, it establishes the Part D late enrollment penalty. 
  • The discount for both brand-name and generic medications in the donut hole (Catastrophic Coverage) will be 75% (See Attached infographic for an explanation of the donut hole.) 
  • Medicare has increased the limit for entering the donut hole (Coverage Gap) from $3,820 to $4,020 and increased the threshold for getting out of the donut hole is $6,350, up from $5,100. (The Coverage Gap limits are set by a formula established in the 2003 drug plan law involving the negotiated value of prescription drug costs.)
  • The beneficiary’s cost sharing in the Catastrophic Coverage phase will be the greater of 5% or $3.60 (up 20¢) for generic drugs and $8.95 (up 45¢) for brand-name medications.
Click to Enlarge – Medicare Donut Hole Infographic

By the way, do you know! More than 52% of people eligible for Medicare in the United States admit that they do not understand Medicare. And due to which they encounter Medicare Enrolment mistakes. If you want to avoid the mistakes, which most people do, enroll for our 40 Mins Free Medicare Orientation Course now!

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