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 2023 Medicare Part D deductible is $505 and many people must satisfy this $505 deductible before their Medicare plan coverage begins - unless they are 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 2023 Medicare plan changed from 2022 using our Medicare Part D 2022/2023 Compare tool or Medicare Advantage plan 2022/2023 Compare tool.

Here are a few examples of how your Initial Deductible affects your Medicare Part D prescription drug coverage.

Example 1: This is your first purchase and your drug plan's $505 Initial Deductible has not yet been met.

If you are just starting your new Medicare Part D plan coverage and your first purchase is a Tier 3 formulary medication that has a retail costs of $340 - and your Medicare plan has a standard 2023 deductible of $505 – you would pay the full retail drug price of $340 and you would then have a remaining Initial Deductible balance of $165 ($505-$340) - this means you would still need to pay $165 out-of-pocket before your Medicare drug plan begins to share in the cost.

Example 2: This is a second drug purchase where the Initial Deductible is not fully met and your co-pay is less than the remaining retail balance (straddle claim).

If you have an $165 balance remaining in your Initial Deductible (from Example 1) and your next purchase was a $440 Tier 3 drug that has a $47 co-pay, you would first pay the $165 balance to meet your $505 Initial Deductible, and the remaining amount of the retail price or $275 ($440 - $165) would carry-over into (or "straddle" into) your Initial Coverage Phase where you have a $47 co-pay.

In this example, since your co-pay ($47) is less than the remaining retail balance ($275), you would pay the $47 Tier 3 co-payment on the $275 balance falling (or "straddling") into the Initial Coverage Phase for a total drug cost to you of $212 ($165 + $47).

Again, you pay off the balance of the Initial Deductible ($165) and then pay the $47 co-pay on the $275 remaining retail balance of the $440 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 the Initial Deductible is not fully met and your co-pay is more than the remaining retail balance (straddle claim).

If you have an $165 balance remaining in your Initial Deductible (from Example 1) and your next purchase was a Tier 3 drug with a $180 retail cost and the plan has a co-pay of $47 for the drug, you would first need to meet the $165 deductible balance (see Example 1 above), then you have $15 of the retail cost that is unpaid ($180 retail drug price - $165 deductible balance) that would “ straddle” into the second phase of your Medicare Part D coverage (Initial Coverage Phase) where you have a $47 co-pay for this Tier 3 drug.

However . . . since you never pay more than the drug's retail cost ($180), your additional cost-sharing would only be the remaining $15 retail balance - and not the $47 co-pay.  Your total drug cost would still be $180 for the Tier 3 drug.

Then, if you purchased a third Tier 3 drug after this $180 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 co-pay for a Tier 3 drug that has a retail price over $47.

Example 4:  Your low-cost Tier 1 and Tier 2 drugs 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 $505 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 $15 (with a co-pay of $3) – you pay only the $3 co-pay and your $505 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 $520 and a $47 co-pay. (straddle claim)

Since you have not met your $505 deductible, your first Tier 3 drug purchase would cost you the full $520 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 $505 of the $520 retail drug cost to satisfy your $505 Initial Deductible, the remaining $15 portion of the retail cost ($520 - $505) would carry over to your Initial Coverage phase where you have a $47 co-pay.

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 co-pay, but instead, you pay the remaining $15 retail balance, so your total cost-sharing would be $520 ($505 + $15).

When you make your next Tier 3 drug purchase, you would be in the Initial Coverage phase and pay only the $47 Tier 3 co-pay.

Example 6: Your Medicare Part D plan has a $505 deductible and your first purchase is a Tier 3 insulin.

You will pay a co-pay of no more than $35 even though you have not met your plan's $505 initial deductible.

Beginning in 2023, all Medicare drug plans will offer all insulin on the plan's formulary at a co-pay of no more than $35 based on the 2022 Inflation Reduction Act (2022 IRA).

The 2022 IRA stipulates that Medicare Part D drug plans must offer various types and forms of insulin for a co-pay of $35 (or less) and will keep this low cost-sharing throughout all phases of coverage including: the plan's Initial Deductible, Initial Coverage phase, and the Coverage Gap (or Donut Hole).

Then in the final Catastrophic Coverage phase you will pay the co-pay ($35 or less) OR 5% of the retail drug price -- whichever is less -- for the remainder of the year.

Example 7: 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 co-pay.

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 co-pay.

Example 8: Your Medicare Part D plan has a $505 deductible and you purchase a non-formulary drug with a retail cost of $500.

You will not have any coverage for a non-formulary drug - and you will pay the full $500 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.