How does the Medicare Part D Initial Deductible work? I use a drug with a $47 copay, but had to pay $390.
In most cases, you must pay your Medicare Part D plan's Initial
Deductible before you receive Medicare Part D coverage - just as you
would with other types of insurance, such as automobile insurance.
For example, the standard
2025 Medicare Part D deductible is $590 (
$615 in 2026)
and many people must satisfy this $590 deductible before their Medicare drug
plan coverage begins - unless they enrolled in a Medicare plan that
excludes certain drugs from the plan's deductible (see Example 4,
below) - or their Medicare drug plan has a $0 deductible.
Reminder: Your drug plan's Initial Deductible can change every year.
Remember, your Medicare Part D plan's Initial Deductible
can change
(increase or decrease) every year - or even be eliminated (reduced to
$0), so be sure to read your Annual Notice of Change letter
(
ANOC)
that you receive in late-September each year to see how your Medicare
plan coverage will change in the next year - or you can see how your
2025 Medicare plan changed from 2024 using our
Medicare Part D 2024/2025 Compare
tool or
Medicare Advantage plan 2024/2025 Compare
tool.
Here are a few examples of how your Initial Deductible affects your Medicare Part D prescription
drug coverage.
Example 1:
What do I pay when my first purchase of the year is a $390 Tier 4 drug and I have a $590 deductible?
You will pay the $390 retail drug price. If you are just starting your new Medicare Part D plan coverage and your first purchase is a
Tier 4 formulary medication
that has a retail costs of $390 - and your Medicare plan has a
standard 2025 deductible of $590
– you would pay the full retail drug price of $390 and you would then have a
remaining Initial Deductible balance of $200 ($590-$390) - this means
you would still need to pay $200 out-of-pocket before your Medicare drug
plan begins to share in the cost of formulary drug purchases.
Example 2: This is your second drug purchase where your Initial Deductible is not fully met and your copay is
less than the remaining retail balance
(
straddle claim)
.
If you have a $200 balance remaining in your Initial Deductible (from
Example #1) and
your next purchase is a $460 Tier 3 drug
that has a $47 copay, you would first pay the $200 balance to meet
your $590 Initial Deductible, and the remaining amount of the retail
price or $260 ($460 - $200) would carry-over into (or "straddle" into)
your Initial Coverage phase where you have a $47 copay.
In this example, since your $47 copay is less than the remaining retail
balance ($260), you would pay the $47 Tier 3 copay on the $260 balance
falling (or "
straddling")
into the Initial Coverage Phase for a total drug cost to you of $247
($200 + $47).
Again, you pay off the balance of the Initial Deductible
($200) and then pay the $47 copay on the $260 remaining
retail balance of the $460 Tier 3 drug purchase that falls or
“
straddles” from your Initial Deductible into
the Initial Coverage phase.
Example 3: This is your second drug purchase where your Initial Deductible is not fully met and your copay is
more than the remaining retail balance
(
straddle claim)
.
If you have an $200 balance remaining in your Initial Deductible (from
Example #1) and your
next purchase is a Tier 3 drug
with a $205 retail cost and the plan has a copay of $47 for the drug,
you would first need to meet the $200 deductible balance (see Example 1 above),
then you have $5 of the retail cost that is unpaid ($205 retail drug
price - $200 deductible balance) that 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 drug.
However . . . since you
never pay more than the drug's retail cost
($205), your additional cost-sharing would only be the remaining $5
retail balance - and not the $47 copay. Your total drug cost would
still be $205 for the Tier 3 drug.
Then, if you
purchased a third Tier 3 drug after this $205 drug purchase, the third
Tier 3 purchase would be completely in your plan's Initial Coverage
phase (or your second phase of coverage) - and you would pay your $47
copay for a Tier 3 drug that has a retail price over $47.
Example 4:
What will I pay when my first purchase of the year is a $22 Tier 2 drug excluded from my deductible?
You will pay your plan’s Tier 2 copay. Many 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 $590 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 $590 deductible is not affected by your purchase.
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 that are excluded from the Initial
Deductible and you now have a Tier 3 drug with a retail cost of $600
and a $47 copay. (
straddle claim)
Since you have not met your $590 deductible, your first Tier 3 drug
purchase would cost you the full $600 retail cost - and like the
Example #2 and
Example #3 above - this example
straddles
the Initial Deductible and Initial Coverage phases.
You would first pay $590 of the $600 retail drug cost to satisfy your
$590 Initial Deductible, the remaining $10 portion of the retail cost
($600 - $590) would carry over (straddle) to your Initial Coverage phase where you
have a $47 copay.
But once again (as in
Example #3), since
you never pay more than the drug plan’s retail cost,
you are
not charged the full $47 copay, but instead, you pay the
remaining $10 retail balance, so your total cost-sharing would be $600 ($590 + $10).
When you make your next Tier 3 drug purchase, you would be in the Initial Coverage phase and pay only
the $47 Tier 3 copay.
Example 6: What do I pay for a $12,000 Tier 5 specialty drug when I have a $590 Initial Deductible? (
straddle claim)
$2,000. Your coverage cost in this example would be calculated like the straddle claim in Example 3, above. However, if you are using a medication with a retail cost over $6,230, having a 25% cost-sharing, you will move through (or
straddle) all three phases of your drug coverage with a single purchase: you will satisfy your $590 deductible, enter and exit your Initial Coverage phase, and finish in the Catastrophic Coverage phase where you pay $0 cost-sharing through the remainder of the year.
The total cost of your first $12,000 purchase would be $2,000 calculated as:
$590 deductible + $1,410 in initial coverage phase + $0 in the Catastrophic Coverage phase.
Tip: To help you estimate your own out-of-pocket drug costs, you can use our
PDP-Planner or out-of-pocket spending calculator – in this $12,000 example, you can enter a $590 deductible and this will show you the costs in each Part D plan phase throughout the year.
Example 7: Your Medicare Part D plan has a $590 deductible and your first purchase
is a Tier 3 insulin.
You will pay a copay of no more than $35 even though you have not met your plan's initial deductible. Since the purchase of your insulin products will not affect the deductible - just as with the purchase of a Tier 1 or Tier 2 drug excluded from the deductible.
As background, beginning with plan year 2023, all Medicare drug plans offer all insulin on the plan's formulary at a copay of no more than $35 based on the
2022 Inflation Reduction Act (IRA).
The IRA stipulates that Medicare Part D drug plans must offer various types and forms of insulin
for a copay of $35 (or less) and will keep this low cost-sharing throughout all phases of coverage.
Example 8: Your Medicare Part D plan has a $0 deductible and you purchase a Tier 3 drug with a retail cost of $500
and a $47 copay.
You pay $47. Since your Medicare Part D drug plan has a $0 deductible, you have immediate cost-sharing or
coverage for your Tier 3 drug purchase and you will pay only the $47 copay.
Example 9:
Your Medicare Part D plan has a $590 deductible and you purchase a non-formulary drug with a
retail cost of $535.
You pay the $535 retail price. You will not have any coverage for a non-formulary drug - and you will pay the full $535 retail drug cost.
If you use a non-formulary drug, you can ask your Medicare Part D plan for a
formulary exception
whereby your non-formulary drug will be covered by your plan. However,
a Medicare drug plan is not obligated to approve your formulary
exception request and you may need to appeal your plan's rejection of
your request. You have the
right to appeal a negative decision
through a number of layers, ultimately having the review of an independent group.
You also have the option of using a
Drug Discount card as provided by companies like GoodRx or WellRx to purchase the non-formulary drug.