Medicare beneficiaries that enter the catastrophic coverage phase of their drug coverage are required to pay 5% of the drug's cost unless they qualify for Medicare's LIS program. This 5% is often a lot better than what is required to be paid prior to the catastrophic phase, but their is not limit on the total amount beneficiaries can incur from these out of pocket costs annually. The Inflation Reduction Act of 2022 addressed the high prescription costs for Medicare beneficiaries by reducing out of pocket costs for beneficiaries and their medications while also reducing government spending. The institution of a Part D cap on out of pocket prescription costs for Medicare Part B beneficiaries drastically cuts these costs. This cap forces PDP plan providers and the drug companies manufacturing the drug to pay more of the associated costs for expensive drugs, when typically these expenses fell on the Part D enrollee and the federal government.
2024 PDP Phase Changes
Deductible Phase: In this phase, beneficiaries pay 100% of drug costs with some deductibles reaching $500+ for 2024 PDP plans. Not all plans have a deductible phase.
Initial Coverage Phase: In this phase, beneficiaries pay 25% of their drug costs while the plan will pay the remaining 75%. This phase lasts until costs total $5,030 for 2024. There often is a copayment or co-insurance during this phase when paying your portion of the cost.
Coverage Gap or Donut Hole Phase: In this phase, beneficiaries pay 25% of drug costs for all covered generic and brand name drugs. The plan will pay the remaining 75% of the costs for generics and 5% for brand names while the manufacturers give beneficiaries a 70% discount for these drugs.
Catastrophic Phase: In this phase, the threshold is $8,000 for 2024. Once the threshold is met, Medicare pays 80% of the drug costs while the plan pays 20% of the remaining cost. In 2023, you were required to pay 5% of the remaining cost while the plan paid 15%, however this has changed for 2024.
The elimination of the 5% required for beneficiaries to pay in the catastrophic phase will save enrollees thousands of dollars on brand name drugs going forward. This change will only benefit individuals who do not qualify for LIS.
