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What is the Initial Deductible and How Does it Work?


The Initial Deductible phase is the first phase of your Medicare Part D prescription drug coverage. Typically during this phase of coverage, you are 100% responsible for your medication costs—up to the initial deductible.

Medicare Part D Coverage Phases


For example, if your plan’s initial deductible is $415, you would be responsible for the first $415 of your prescription costs. If you have a Tier 3 medication with a $100 retail cost, you would pay 100% of the $100 until you spend $415.

The initial deductible is for a calendar year, so on January 1st of each year, when your new Medicare Part D plan coverage takes effect, you are once again in the Initial Deductible phase.

If you change Medicare prescription drug plans during the year, your year-to-date out-of-pocket costs will transfer to your new Medicare plan, so if you have already paid $415, you would not need to re-start your Medicare Part D plan coverage and pay a second Initial Deductible in your new plan.


The CMS Standard Initial Deductible

Each year the Centers for Medicare and Medicaid Services (CMS) establishes the Medicare Part D standard initial deductible. The 2019 standard initial deductible set by CMS is $415. This figure is the maximum that Medicare Part D plans can set as the deductible for their prescription drug coverage. However, Medicare Part D plans are not required to use the CMS standard initial deductible.

In fact, you may find that a Medicare Part D plan’s deductible:
  • may be lower than the CMS standard deductible, but never higher,
  • can be $0. These plans are also known as providing first dollar coverage,
  • can exclude drugs on chosen formulary tiers.
» Click here to see a comparison of Medicare Part D plan parameters for all years since 2006

When drug tiers are excluded from the Initial Deductible

Some Medicare Part D plans exclude lower costing generic drug tiers from the deductible (such as Tier 1 and Tier 2 drugs). This means that if you are in your plan’s initial deductible phase and you purchase a Tier 1 preferred generic drug with a retail cost of $8 and a copay of $1, you will pay the $1 copay. However, if you are in the initial deductible and buy a Tier 3 preferred brand-name drug with a retail cost of $75 and a copay of $30, you will pay the $75 retail cost, because this drug tier (Tier 3) is not excluded from the deductible.

Some examples of how the Initial Deductible works


Example 1: Your Medicare Part D plan has an Initial Deductible, and this is your first purchase of the year.

In this example, it is January and we just started a new Medicare Part D plan year.

You would pay $300 in cost-sharing (the full retail price) and you would then have a remaining Initial Deductible balance of $115 ($415 - $300).


Example 2: You purchase another Tier 3 brand and you meet your Initial Deductible and your cost-sharing is more than the retail balance (straddle claim).

If your next purchase is another Tier 3 drug with a $143 retail cost and a copay of $47, you would first cover the $115 balance of your deductible (from Example 1), and then have $28 remaining ($143 retail price for this purchase - $115 deductible balance from the previous purchase). The $28 would “straddle” into the second phase of your Medicare Part D coverage (Initial Coverage Phase) where you have a $47 copay for this Tier 3.

Your cost-sharing would calculate to $162 the remainder of the deductible ($115) plus the copay for the initial coverage phase ($47), however . . .

Since you never pay more than retail ($143), your cost-sharing would be $143 rather than $162 because the retail price ($143) is less than the calculated cost-sharing of $162. Your next drug purchases will be completely in the Initial Coverage phase (your second phase of coverage) - and you will only pay your copay.


Example 3: What if your second purchase meets the remainder of the Initial Deductible and your cost-sharing is less than the retail balance (straddle claim).

If you have a $115 balance remaining in your Initial Deductible (from Example 1) and you purchase a $370 Tier 3 drug that has a $47 copay, you would first cover the $115 balance to meet your $415 Initial Deductible. The remaining amount of the retail price $255.

$370 (your plan’s negotiated retail price)
- $115 (left over in Deductible from the last purchase)
$255 (goes into the Initial Coverage phase)    

This $255 would carry over to the Initial Coverage phase. So this one purchase would "straddle" two phases of coverage. In this example, you have a $47 copay in the initial coverage phase.

We would calculate your cost-sharing as $162 — the remainder of the deductible ($115) plus the copay for the initial coverage phase ($47).

As you know from the last example, you never pay more than retail. But in this example, your calculated copay ($162) is less than the retail cost of your medication ($370), so your cost-sharing would be $162 ($115 + $47) for this purchase.  Again, the $47 is the copay on the $255 remaining retail balance of the $370 drug purchase that falls or "straddles" from your Initial Deductible phase into the Initial Coverage phase.

Your next drug purchases will be completely in the Initial Coverage phase (your second phase of coverage) — and you will only pay your copay.

Example 4: You only use Tier 1 and Tier 2 drugs and they are excluded from the Initial Deductible.

Some Medicare Part D plans exclude Tier 1 and Tier 2 drugs from the plan's Initial Deductible and these low-costing drugs are not impacted by your Initial Deductible and have immediate coverage as if you were in your plan’s Initial Coverage phase.

So, if you have a $415 standard deductible with Tier 1 and Tier 2 drugs excluded from the deductible, and you purchase a Tier 2 generic drug that has a retail price of $22 (with a copay of $3) – you pay only the $3 copay and your $415 deductible is not affected.  You can click here to read more about Tier 1 and Tier 2 exclusions.


Example 5: You only use Tier 1 and Tier 2 drugs and they are excluded from the initial deductible and you now have a Tier 3 drug with a retail cost of $430 and a $40 copay.

Since you have not met your $415 deductible, your first Tier 3 drug purchase should cost you $430 and straddle the Initial Deductible and Initial Coverage phases.

Your cost-sharing would be calculated by first covering the $415 Initial Deductible, the remaining $15 portion of the retail cost ($430 - $415) would carry over to your Initial Coverage phase where you have a $40 copay, making your calculated cost-sharing for this purchase $455 ($415 + $40).

This would mean that your cost-sharing would calculate to $462 the deductible ($415) plus the copay for the initial coverage phase ($40). But . . .

Since you never pay more than the drug plan’s retail cost ($430), and your cost-sharing would be $455, which is higher than the drug’s retail cost, you pay the retail cost ($430).

When you make your next Tier 3 drug purchase, you would be in the Initial Coverage phase and pay only the $40 copay.



Tips & Disclaimers
  • The Medicare Advantage and Medicare Part D prescription drug plan data on our site comes directly from Medicare and is subject to change.
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  • When enrolling in a Medicare Advantage plan, you must continue to pay your Medicare Part B premium.
  • Medicare beneficiaries with higher incomes may be required to pay both a Medicare Part B and Medicare Part D Income Related Monthly Adjustment Amount (IRMAA). Read more on IRMAA.
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  • If you are enrolled in a Medicare plan with Part D prescription drug coverage, you may be eligible for financial Extra Help to assist with the payment of your prescription drug premiums and drug purchases. To see if you qualify for Extra Help, call: 1-800-MEDICARE (1-800-633-4227). TTY users should call 1-877-486-2048, 24 hours a day/ 7 days a week or consult www.medicare.gov; the Social Security Office at 1-800-772-1213 between 7 a.m. and 7 p.m., Monday through Friday. TTY users should call, 1-800-325-0778; or your state Medicaid Office.
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  • Disclaimer for Chronic Condition Special Needs Plan (SNP): This plan is available to anyone with Medicare who has been diagnosed with the plan specific Chronic Condition.
  • Medicare MSA Plans combine a high deductible Medicare Advantage Plan and a trust or custodial savings account (as defined and/or approved by the IRS). The plan deposits money from Medicare into the account. You can use this money to pay for your health care costs, but only Medicare-covered expenses count toward your deductible. The amount deposited is usually less than your deductible amount, so you generally have to pay out-of-pocket before your coverage begins.
  • Medicare MSA Plans do not cover prescription drugs. If you join a Medicare MSA Plan, you can also join any separate (stand-alone) Medicare Part D prescription drug plan
  • There are additional restrictions to join an MSA plan, and enrollment is generally for a full calendar year unless you meet certain exceptions. Those who disenroll during the calendar year will owe a portion of the account deposit back to the plan. Contact the plan provider for additional information.
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