Medicare has four drug coverage phases:
- Deductible – This is the first phase of a Part D plan. Your deductible is the amount you must pay before Medicare or the plan begins to pay. This amount can change each year. If your plan doesn't have a deductible, then the initial coverage phase starts at once.
- Initial Coverage – You pay a copay (set dollar amount) or coinsurance percentage of the cost). Your plan covers the rest. This amount can change each year.
- Coverage Gap – After you and the plan have spent enough to reach the initial coverage limit, you enter the coverage gap or “donut hole.” You may be responsible for paying a larger portion of your drug costs, depending upon the plan.
- Medicare plans that include prescription drug coverage often offer different levels of coverage during the gap. Once you spend enough to get out of the coverage gap, you automatically get catastrophic coverage.
- Catastrophic Coverage – You pay a smaller copay or coinsurance than you did during the initial coverage phase or the coverage gap. This lasts until the end of the plan year.