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 2022 Medicare Part D deductible is $480 and many people must satisfy this $480 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 2022 Medicare plan changed from 2021 using our Medicare Part D 2021/2022 Compare tool or Medicare Advantage plan 2021/2022 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 $480 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 2022 deductible of $480 – you would pay the full retail price of $340 and you would then have a remaining Initial Deductible balance of $140 ($480-$340) - this means you would still need to pay $140 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 $140 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 $140 balance to meet your $480 Initial Deductible, and the remaining amount of the retail price or $300 ($440 - $140) 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 is less than the remaining retail balance, you would pay the $47 Tier 3 co-payment on the $300 balance falling (or "straddling") into the Initial Coverage Phase for a total drug cost to you of $187 ($140 + $47).  Again, you pay off the balance of the Initial Deductible ($140) and then pay the $47 is the co-pay you pay on the $300 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).


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 $480 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 $480 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 $500 and a $47 co-pay. (straddle claim)

Since you have not met your $480 deductible, your first Tier 3 drug purchase should cost you the full $500 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 $480 of the $500 retail drug cost to satisfy your $480 Initial Deductible, the remaining $20 portion of the retail cost ($500 - $480) 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 $20 retail balance.

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 $480 deductible and your first purchase is a Tier 3 insulin that is part of your plan's Senior Savings Model.

You will pay a co-pay of no more than $35 even though you have not met your plan's $480 initial deductible.

A Medicare drug plan that participates in the Senior Savings Model offers various types and forms of insulin for a co-pay of $35 (or less) and will keep the low cost-sharing throughout 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 5% of the retail drug price for the remainder of the year.

But remember, not all types of insulin may be covered by your plan's Senior Savings Model and may be subject to the initial deductible - and your plan's standard cost-sharing (such as 25% of retail).

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 $480 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.