As of January 1, 2020, changes to Medicare’s Part D Prescription Drug plan can impact how much Medicare recipients pay per month and how much they pay out of pocket. Significant changes may also impact the coverage gap.
Changes to the Part D Premium in 2020
Part D plans are offered by private insurers as stand-alone plans or as part of a Medicare Advantage plan. These carriers determine the monthly premium recipients pay and carriers may offer a selection of plans at different monthly price points. Factors that determine how much the monthly premium will be include the copay the insurer requires for each prescription, the deductible recipients are obligated to pay and the list of drugs available on the carrier’s formulary.
In addition to a monthly premium, recipients with certain incomes may be required to pay extra for their Part D plan; this is called the Part D income-related monthly adjust amount (IRMAA). For 2020, this amount is based on the recipient’s tax filing status for 2018.
The 2020 Part D IRMMA for individual tax filers for 2018:
- Below $87,000: None
- Between $87,000 and $109,000: $12.20
- Between $109,000 and $136,00: $31.50
- Between $136,000 and $163,000: $50.70
- Between $163,000 and $500,000: $70.00
- Above $500,000: $76.40
The 2020 Part D IRMMA for joint tax filers for 2018:
- Below $174,000: None
- Between $174,000 and $218,000: $12.20
- Between $218,000 and $272,000: $31.50
- Between $272,000 and $326,000: $50.70
- Between $326,000 and $750,000: $70.00
- Above $750,000: $76.40
Medicare recipients who do not enroll in a Part D prescription drug plan or have creditable coverage with another plan for 63 days or more past their Initial Enrollment Period may be charges a late enrollment penalty if they choose a Part D plan later on. The penalty amount is a percentage based on the national base premium for Part D plans multiplied by the number of full months without coverage.
This base premiums is used even if the plan you wish to enroll in does not charge you a monthly premium. For 2020, the national base premium is $32.74; the penalty percentage is 1%. If you are without coverage for a full 10 months, you would multiply 10 by $0.3274, which would make your penalty payment $3.27.
Changes to the Part D Annual Deductible in 2020
The annual deductible is the amount you must pay before your insurer begins to cover the costs of your prescriptions. While individual plans can set different deductible amounts, Medicare imposes a maximum limit. In 2020, plans cannot set their deductible higher than $435.
Medicare does not limit the amount plans can require for copayments and coinsurance amounts. Medicare also does not standardize how drugs are categorized into different tiers, which impacts how much the copayment or coinsurance amount for that medication may be in each tier. Part D insurers may categorize the same medication in different tiers from plan to plan.
Changes to the Part D Coverage Gap in 2020
Part D plans are not required to impose an initial coverage limit, but for those that do, the max limit for 2020 is $4,020. Once the costs you and your Part D plan pay have reached this limit, you will pay a fixed 25% of Medicare’s costs for prescription medication until the catastrophic coverage threshold is reached. In 2020, the catastrophic coverage threshold is $6,350. Once you are eligible for catastrophic coverage, you will only pay 5% of Medicare’s cost for prescription medication.