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Medicare Part D, which
covers outpatient prescription drugs for people with Medicare, has four
phases of coverage: the deductible, when the beneficiary pays the full
cost of the medication; the initial coverage period, when the plan pays
for most of the cost of the medication and the beneficiary pays a copay
or coinsurance; the coverage gap, also known as the “donut hole,” where
the beneficiary pays 25% of the cost while the government, drug
manufacturers, and the plan pay the rest; and finally, the catastrophic
coverage phase, where beneficiaries usually pay 5% of the cost and plan
pays for the remainder.
In 2021, beneficiaries will reach catastrophic coverage phase when they
have spent $6,550. But because there is no hard cap on beneficiary
out-of-pocket spending in Part D, those who take high-cost medications
may pay thousands of dollars above the catastrophic threshold—5% of a
$10,000 drug can add up fast.
This week, the Kaiser Family Foundation (KFF) released a report
showing that for millions of older adults and people with disabilities,
this scenario is all too real. Over the five-year period from 2015-2019,
2.7 million enrollees had at least one year with spending above the
catastrophic limit, and over the ten-year period from 2010-2019, 3.6
million did. Reaching catastrophic coverage can come with enormous
expense. In 2019 alone, nearly 1.5 million Part D enrollees spent $1.8
billion on prescription medications after exceeding the threshold.
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