Both. When you purchase your medications, the retail cost of your drug can move you from one part of your Medicare Part D plan coverage into another part.
When this occurs and your prescription purchase moves you between Medicare plan coverage phases, you will have a “straddle claim
” and you will notice a difference in your drug cost as a portion of coverage will fall into two or more parts of your drug plan. In this example, the cost of your prescription medication purchase is split between your Initial Coverage Phase and your Donut Hole phase.
As a note, the negotiated retail cost of your medications determines when you reach the Initial Coverage Limit (ICL) -- and the ICL can change each year. The standard ICL for 2022
is $4,430. So when the negotiated retail cost of you medications is over $4,430, you will move into the Coverage Gap. (To see the Initial Coverage Limit for another year, you can use the link: https://q1medicare.com/PartD-The-MedicarePartDOutlookAllYears.php
Once you exceed your Initial Coverage Limit, you will enter the Donut Hole portion of your Medicare Part D plan coverage and the remainder of your prescription purchase will be reduced by the Donut Hole discount.
So you will pay your plan's cost-sharing (copayment or co-insurance) for your medication PLUS you will pay 25% of the balance of the negotiated retail price above the Initial Coverage Limit that falls into the Donut Hole (the 75% donut hole discount is applied. You can click here to read more about the Donut Hole discount
How does this work? Example of a 2022 Straddle Claim:
The retail price of your drug: $1,000
Your total accumulated retail drug costs before the $1,000 drug purchase: $4,310
Your Medicare Part D plan has a standard $4,430 Initial Coverage Limit
Your plan's coverage cost or co-pay for the $1,000 formulary drug: $100
1. Your cost to exit the Initial Coverage Phase
will need to spend $120 to meet the $4,430 Initial Coverage Limit
($4,430 - $4,310) - and you will pay $100 as a co-pay for your
medication during this phase.
2. The cost in the Donut Hole
balance of the retail cost or $880 ($1,000 - $120) will carry over to
the next phase of your drug coverage or the Donut Hole where you will
receive the 75% Donut Hole discount
costing you $220 in the second portion of this straddle claim.
3. Your total cost for the $1,000 drug
So together in 2022, you would pay $100 + $220 for a total cost of $320 for this drug.
Question: Can the coverage cost exceed the retail drug cost?
The total of your plan's cost-sharing plus the Donut Hole cost (not including the Donut Hole discount) cannot exceed the normal negotiated retail price of your medication -- as you never pay more than the negotiated retail price.