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 $435 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 $4020.
For example, let us assume that your total yearly prescription drug expenses are $4080.
Therefore, you will pay 25% of the difference between the deductible ($435 ) and $4020 which is: (4020 - 435 )*0.25 = $896.25.
When your costs total more than $4020, you will be responsible for 100% of the difference between $4020 and (as in our example) $4080 or an additional cost of $60.
Your total ESTIMATED annual "Out of Pocket" prescription drug cost with a Medicare Part D plan should then be around: $435 + $896.25 + $60 = $1391.25
(plus the monthly premiums for the Medicare Part D plan).