You exit your Medicare Part D plan's Coverage Gap (or Donut Hole) and enter into the
Catastrophic Coverage phase - for the remainder of the plan year (until December 31st) - and the cost of your formulary Part D drugs will be significantly reduced.
Medicare Part D Catastrophic Coverage is the fourth and final phase of
your Medicare Part D prescription drug plan coverage. Although most people never reach this phase, if you purchase expensive Part D formulary drugs (for example, with retail cost over $10,000), you will reach Catastrophic Coverage after you exceed your Medicare Part D prescription drug plan's $6.550 annual out-of-pocket spending limit (
TrOOP), exit the
Coverage Gap phase (Donut Hole) and enter the Catastrophic Coverage phase.
How your cost-sharing changes in each phase of your Medicare Part D plan coverage.
Here is how example formulary drug purchases are calculated throughout your 2021 Medicare Part D plan (using the CMS defined standard benefit Medicare Part D plan as a guide).
When you purchase a formulary medication
with a $100 ($200) retail cost in 2021
|
|
Retail Cost
|
You Pay
|
Medicare Plan Pays
|
Pharma Mfgr Pays
|
Gov. Pays
|
Amount toward your TrOOP
|
Initial Deductible
|
$100
|
$100
|
$0
|
$0
|
$0
|
$100
|
Initial Coverage Phase *
|
$100
|
$25
|
$75
|
$0
|
$0
|
$25
|
Coverage Gap - brand-name discount **
|
$100
|
$25
|
$5
|
$70
|
$0
|
$95
|
Coverage Gap - generic discount ***
|
$100
|
$25
|
$75
|
$0
|
$0
|
$25
|
Catastrophic Coverage (brand drug) ****
|
$200
|
$10
|
$30
|
$0
|
$160
|
n/a
|
Catastrophic Coverage (generic drug) ****
|
$100
|
$5
|
$15
|
$0
|
$80
|
n/a
|
* 25% co-pay or cost-sharing
** 75% Brand-name
Donut Hole Discount
*** 75% Generic Donut Hole Discount
****
In 2021,
you pay 5% of retail or $9.20 for brand drugs whatever is higher or
5% of retail or $3.70 for generic or multi-source drugs whatever is
higher (80% paid by Medicare, 15% paid by Medicare plan, and around 5% by plan member)
Question: Will my drug costs in the Catastrophic Coverage phase depend on my chosen Medicare Part D plan?
Yes. Your Catastrophic Coverage costs are calculated based on your plan's retail drug prices - and retail drug prices can vary plan-to-plan. In the Catastrophic Coverage phase, all Medicare Part D plans use the same cost-sharing structure. You pay the higher of 5% of retail or a fixed copay -- in 2021, $3.70 for generics or multi-source preferred drug and $9.20 for all other drugs, namely brand-name drugs.
So, you may pay more for your drugs in Catastrophic Coverage if your Medicare prescription drug plan has higher negotiated retail drug prices as compared to someone who is in a Medicare Part D plan with lower negotiated drug costs.
In the Catastrophic Coverage phase there are only two (2) cost-sharing tiers and the cost-sharing can change each year (see chart in next section):
- generics and preferred brand drugs that are multi-source drugs —
In 2021, you will pay the higher of $3.70 OR 5% of the
plan's negotiated retail drug cost
- all other drugs (such as brand-name, single-source drugs) —
In 2021, you will pay the higher of $9.20 OR 5% of the
plan's negotiated retail drug cost for medication.
In other words, in 2021, you would be charged
$3.70 for those generic or
preferred multi-source drugs with a retail price
under $72 and 5% of
the plan's negotiated retail drug price for those drugs with a retail
price greater than $72 and, for all other formulary drugs, you would pay
$9.20
for drugs with a retail price under $179 and 5% for those with a
retail price over $179.
As a 2021 example, if you are using a brand-name, single-source formulary drug with a
retail cost of $100, you would pay $9.20 as a co-pay for the drug in the
Catastrophic Coverage phase because ... 5% of $100 is $5.00 and since $9.20 is greater than $5.00 -
you pay the higher amount. As stated above, the 2021 brand-name drug Catastrophic Coverage
cost-sharing is $9.20 or 5% of the retail drug cost, whichever is
higher. However, if someone else is in another Medicare Part D plan where the same brand drug has a $200 retail cost, the person would pay $10 (5% of $200) for the drug since this is higher than the 2021 fixed $9.20 co-pay for brand drugs.
Cost-sharing in the Catastrophic Coverage phase changes slightly year-to-year.
The chart below shows the cost-sharing for the Catastrophic Coverage phase over the past few
years. You can click the plan year to see examples and more details for a specific year or
click here to see a chart of Medicare Part D plan parameters for all years since 2006.
Catastrophic Coverage Phase Cost-Sharing
|
Plan Year |
TrOOP |
Generics or
Preferred Brand Drugs
that are Multi-Source Drugs |
All Other Drugs
(e.g., brand-name) |
2022 |
$7,050 |
$3.95 |
$9.85 |
2021 |
$6,550 |
$3.70 |
$9.20 |
2020 |
$6,350 |
$3.60 |
$8.95 |
2019 |
$5,100 |
$3.40 |
$8.50 |
2018 |
$5,000 |
$3.35 |
$8.35 |
2017 |
$4,950 |
$3.30 |
$8.25 |
2016 |
$4,850 |
$2.95 |
$7.40 |
2015 |
$4,700 |
$2.65 |
$6.60 |
2014 |
$4,550 |
$2.55 |
$6.35 |
2013 |
$4,750 |
$2.65 |
$6.60 |
Question: Will I get Catastrophic Coverage for non-formulary drugs?
No. Please keep in mind that the Catastrophic Coverage phase cost-sharing only applies to medications that are on your Part D plan's formulary (drug list). Therefore, if you are prescribed medication that is not covered on your Medicare Part D formulary, you will be responsible for 100% of the drug's cost - even when in the Catastrophic Coverage phase of your Medicare Part D plan coverage.
If you have a non-formulary medication, you may wish to
request a formulary exception and ask to have your medication added to your formulary so that it will be covered during all phases of your Medicare Part D coverage.
Question: Does my Medicare Part D coverage have a maximum out-of-pocket (MOOP) spending limit?
No. Unfortunately, your Medicare Part D prescription drug coverage does not have a
maximum annual spending limit. Your annual out-of-pocket costs for Medicare Part D coverage are
theoretically unlimited.