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How does the Medicare Part D Initial Deductible work? I use a drug with a $47 co-pay, but had to pay $301.

Category: Straddle Claims


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 2019 Medicare Part D deductible is $415 and people must satisfy this 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).

Remember, your Medicare Part D plan's Initial Deductible can change every year or even be eliminated, 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.

Example 1: This is your first purchase and your 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 costs $301 (retail) - and your Medicare plan has a standard deductible of $415 – and the Tier 3 medication has a $47 co-pay, you would pay the full retail price of $301 and you would then have an Initial Deductible balance of $114 ($415-$301).

Example 2: This is your second purchase where the Initial Deductible is met and your co-pay is more than the retail balance (straddle claim).

If your next purchase was a Tier 3 drug with a $143 retail cost and the plan has a co-pay of $47 for the drug, you would first meet the $114 balance of your deductible, then have $29 remaining ($143 retail price - $114 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.

However, since you never pay more than retail ($143), your additional cost-sharing would be the remaining $29 retail balance - instead of the $47 co-pay. Your total drug cost would still be $143 for the $143 drug and your next drug purchase would be completely in the Initial Coverage Phase (or your second phase of coverage) - and you would pay your $47 co-pay.

Example 3: This is a second drug purchase where the Initial Deductible is met and your co-pay is less than the retail balance (straddle claim).

If you have an $114 balance remaining in your Initial Deductible (from Example 1) and you purchase a $396 Tier 3 drug that has a $47 co-pay, you would pay the $114 balance to meet your $415 Initial Deductible, and the remaining amount of the retail price ($396 - $114 = $282) would go into (or your claim would "straddle") your Initial Coverage Phase where you have a $47 co-pay.

In this example, since you never pay more than your plan's negotiated retail price, and your co-pay is less than the remaining retail balance, you would pay the $47 Tier 3 co-payment on the $282 balance falling (or "straddling") into the Initial Coverage Phase for a total of $161 ($114 + $47).  Again, the $47 is the co-pay on the $282 remaining retail balance of the $396 drug purchase that falls or “straddles” from your Initial Deductible into the Initial Coverage Phase.

Example 4: 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 $415 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 $23 (with a co-pay of $2) – you pay only the $2 co-pay and your $415 deductible is not affected.  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 $420 and a $40 co-pay.

Since you have not met your $415 deductible, your first Tier 3 drug purchase should cost you $420 and straddle the Initial Deductible and Initial Coverage phases.

You would first pay $415 of the $420 retail drug cost to satisfy your 2019 Initial Deductible, the remaining $5 portion of the retail cost ($420 - $415) would carry over to your Initial Coverage phase where you have a $40 co-pay.

But, since you never pay more than the drug plan’s retail cost, you are not charged the full $40 co-pay, but instead, you pay the remaining $5 retail balance.

When you make your second Tier 3 drug purchase, you would be in the Initial Coverage phase and pay only the $40 co-pay.





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