The Initial Coverage Limit is the number that determines when you leave your Medicare Part D plan's Initial Coverage Phase and enter into the Donut Hole or Coverage Gap. The 2015 Initial Coverage Limit is reached when the total value of your retail drug purchases exceeds $2,960. But this is better explained with a little context. As background, your Medicare Part D prescription drug plan includes four different phases or parts:
(1) The Initial Deductible is where you pay 100% of your retail drug costs until you reach your deductible amount ($320 in 2015). Many people will enroll in a Medicare prescription drug plan with a $0 deductible and effectively skip-over this first phase.
(2) The Initial Coverage Phase is where you and your Medicare Part D plan will share in the cost of your medication purchases based on your plan's cost-sharing (such as a $30 co-payment or 25% co-insurance). When the retail value of your drug purchases exceeds your Initial Coverage Limit (ICL or Donut Hole entry point), you will leave your Initial Coverage Phase and enter the Coverage Gap or Donut Hole.
Please note that the Initial Coverage Limit is not measured by what you have spent on medications. Instead, the ICL is the total retail value of your prescription drug purchases. So this is the amount that you pay for your prescriptions plus what your Medicare Part D plan is paying.
So if you buy a $100 prescription and you pay a $30 co-pay (the Medicare Part D plan pays the other $70), the total $100 retail cost is credited toward your 2015 Initial Coverage Limit of $2,960. In this case, after the $100 drug purchase, you have $2,860 remaining in drug purchases before entering the Donut Hole.
You may find that your plan's retail drug costs are not the same as another Medicare Part D plan's cost. In other words, you might buy a medication like
Atorvastatin (10mg) and your plan will have a retail price of $20, although you may only pay a $4 co-pay. However, a friend with another Part D plan may use the same medication and also have a $4 co-pay, but the retail price for their plan will be around $7. So, the same medication with the same co-pay, but different negotiated retail prices depending on the Medicare plan - and so different impacts on the Initial Coverage Limit.
As you can imagine, if you purchase of an expensive medication (for example, with a retail cost of over $3,000), your coverage costs may be $750 or less, but the retail cost may exceed the Initial Coverage Limit and push you through the Initial Coverage Phase and into the Coverage Gap - with just one single purchase.
The standard Initial Coverage Limit (entry point to the Coverage Gap or Donut Hole) can vary each year. For instance, the Initial Coverage Limit is $2,960 in 2015 as compared to the Initial Coverage Limit of $2,250 in 2006 . You can view the standard Initial Coverage Limits for the past several years here:
https://q1medicare.com/PartD-The-2015-Medicare-Part-D-Outlook.php
At times, the Initial Coverage Limit can also vary between Medicare Part D plan providers. With the approval of Medicare (or CMS) Medicare Part D plans are allowed to deviate from the annual standard Initial Coverage Limit value and a few companies may offer Part D plans with lower Initial Coverage Limits - although this is rare in today's market.
(3) The Coverage Gap or Donut Hole is the plan phase you enter once you exceed the Initial Coverage Limit and where you were originally responsible for 100% of your drug costs (so this was like a second deductible phase). In 2015, you will receive a 55% discount on brand-name drugs and a 35% discount on generic drugs (you will pay 45% of your plan's negotiated retail cost for brand-name prescriptions and 65% of the retail cost for generics). The Donut Hole will be reduced to a fixed 25% co-insurance cost-sharing structure for both generics and brand-name drugs by 2020. You can read more about the current Donut Hole Discount here:
https://Q1FAQ.com/470.html
(4) The Catastrophic Coverage Phase is the last phase and you enter once your total out-of-pocket drug costs exceed a certain point (over $4,700 in 2015). During this phase you will exit the Donut Hole or Coverage Gap and will receive your medications at a low-fixed price, paying around 5% of the retail price for the remainder of the year.
When you purchase a formulary medication
with a $100 retail cost in 2015
|
|
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 **
|
$100
|
$45
|
$5
|
$50
|
$0
|
$95
|
Coverage Gap -
generic ***
|
$100
|
$65
|
$35
|
$0
|
$0
|
$65
|
Catastrophic
Coverage ****
|
$100
|
$6.60
|
$0
|
$0
|
$93.40
|
$6.60
|
* 25% co-pay
** 55% Discount
*** 35% Discount
**** approx. 5% of retail or $6.60 for brand drugs whichever is larger