Prescription drugs can be expensive. In fact, they can be some of your biggest health expenses. That’s why picking a Medicare plan that includes some form of drug coverage is so important. Whether it’s a stand-alone Medicare Part D plan or part of your Medicare Advantage plan, drug coverage can make essential medicine affordable.

But what about medications that really hit your wallet hard? That’s what catastrophic coverage is for. Don’t let the scary name fool you, it can make life-saving medication affordable! You qualify for catastrophic coverage once you reach your plan’s out-of-pocket threshold.

Don’t let the scary name fool you, it can make life-saving medication affordable!

What is the Coverage Gap?

The coverage gap is the period you enter when your out-of-pocket drug costs reach a certain limit. For 2019, you enter the coverage gap when your drug costs reach $3,820. (Monthly premiums amounts are not included.)

Once you fall into the coverage gap (sometimes referred to as the donut hole), you are responsible for paying a percentage of the price of your prescription costs. Don’t fret, though! This is only temporary.

Once you reach the out-of-pocket threshold ($5,100 in 2019), you enter catastrophic coverage.

Into Catastrophic Coverage

Once you reach that threshold, you are automatically enrolled in catastrophic coverage and your drug plan begins covering all but a small part of your coinsurance or copayment for covered drugs.

For 2019, this is $3.40 for generic drugs, $8.50 for brand name drugs, or 5 percent of the total cost, whichever is highest. The catastrophic coverage phase cost-sharing only applies to medications that are on a Part D plan’s formulary, which vary from plan to plan.

This coverage will last the rest of the calendar year. On January 1 of the next year, you’ll reenter the Annual Deductible phase of your plan. If your plan doesn’t require a deductible, you’ll enter the Initial Coverage stage.

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Interested in comparing competitive prescription drug plans? The Medicareful Plan Finder shows all the available prescription drug plans available in a given zip code, along with their monthly premiums and annual deductible.

Further Reading

Medicare.gov — Catastrophic coverage
Medicareful Living — What is Medicare Part D?

Editor’s Note: Part D standard benefits are up to date as of 1/29/2019.