An example of the CMS model or standard plan in action
Your out of pocket prescription drug costs are calculated on a progressive basis (like your federal income tax).
You will pay the first $400 yourself (as the Medicare Part D Plan deductible). After your deductible, you will pay 25% co-insurance towards all your prescription drug costs up to a total of $3700.
For example, let us assume that your total yearly prescription drug expenses are $4000.
Therefore, you will pay 25% of the difference between the deductible ($400 ) and $3700 which is: (3700 - 400 )*0.25 = $825.
When your costs total more than $3700, you will be responsible for 100% of the difference between $3700 and (as in our example) $4000 or an additional cost of $300.
Your total ESTIMATED annual "Out of Pocket" prescription drug cost with a Medicare Part D plan should then be around: $400 + $825 + $300 = $1525
(plus the monthly premiums for the Medicare Part D plan).