Standard Part D Benefits for 2023
For 2023, the standard benefit requires the beneficiary to pay:
•a $505 deductible
•25% of prescription drug costs during the initial coverage phase – that is, between the deductible and initial coverage limit of $4660 or the actuarial equivalent to an average expected coinsurance of no more than 25 percent of actual cost during the initial coverage phase.
•25% of the cost of generic drugs and 25% of the undiscounted costs of brand name drugs during the “Coverage Gap” phase –
Example 1 – Standard Benefits.
Mr. James is enrolled in a PDP with no monthly premium and a standard benefit structure. He takes 3 prescription drugs with a total cost of $6000 annually. Mr. James pays $1878.75 for his drugs ($6000 (total drug cost) – $505 (deductible) = $5495 x .25 (initial coverage cost sharing percentage) = $1373.75 + $505 (deductible) = $1878.75
Note that, from a beneficiary perspective, there is no longer a “gap.” However, spending after the initial coverage limit during the so-called coverage gap phase remains relevant, because, during this period of drug spending, drug manufacturers are responsible for 70 percent of the cost of the drug (known as the manufacturer discount). This 70 percent is attributed to beneficiary out-of-pocket costs and counts toward the spending necessary to reach the catastrophic coverage phase even though beneficiaries do not pay it.
Part D Standard Benefits for 2023, Catastrophic Coverage
Once beneficiary out-of-pocket costs (including the 70 percent drug manufacturer discounts) reach a total of $7,400, the beneficiary is through the “coverage gap” and reaches catastrophic coverage.
•The out-of-pocket costs that count toward reaching the catastrophic limit are known as “true out-of-pocket” costs or TrOOP. In some instances, amounts not directly paid by the beneficiary, including the manufacturer discounts, count toward TrOOP.
After reaching the annual out-of-pocket threshold, the beneficiary pays either a co-pay of $4.15 for generic drugs or $10.35 for brand name drugs or a co-insurance of 5%, whichever is greater.
Part D Plan Benefits: The Standard Benefit Plan for 2023 (Illustrated)
Medicare Module 3 – Part D Standard Benefit Enrollee Cost Sharing
$505 (deductible) Deductible Enrollee pays 100%
Initial Coverage Enrollee Pays 25% of prescription drug costs
Coverage “Gap” * Enrollee pays 25% of prescription drug costs for generic and 25% of undiscounted cost for brand name
$4660 total drug costs (Initial coverage limit)
Catastrophic Coverage Enrollee pays greater of 5% of prescription drug cost
or
$10.35 brand name/$4.15 generic
$7400 (out of-pocket threshold)
* In the coverage gap, as previously noted, drug manufacturers pay 70 percent of the cost of brand name drugs through a discount. Although not paid by the enrollee, the discounted amount for brand name drugs counts toward the enrollee’s annual out-of-pocket threshold. But the enrollee cost-sharing for brand name drugs is based on the undiscounted cost. Coverage “Gap” Percentage Division: Enrollee 25%, Manufacturer Discount(s) 70%, Plan 5%
