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 $415 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 $3820.
For example, let us assume that your total yearly prescription drug expenses are $4050.
Therefore, you will pay 25% of the difference between the deductible ($415 ) and $3820 which is: (3820 - 415 )*0.25 = $851.25.
When your costs total more than $3820, you will be responsible for 100% of the difference between $3820 and (as in our example) $4050 or an additional cost of $230.
Your total ESTIMATED annual "Out of Pocket" prescription drug cost with a Medicare Part D plan should then be around: $415 + $851.25 + $230 = $1496.25
(plus the monthly premiums for the Medicare Part D plan).