Annual Medicare
Costs and the
Coverage Gap


The monthly premium for Medicare Part D coverage stays the same during a plan year. However, your other Part D plan costs may change throughout the year based on the following four stages:

Annual Deductible

This stage begins when you fill your first prescription of the plan year. You pay the full cost of your prescriptions until the total amount of your deductible has been reached. If your plan has a $0 deductible, the annual deductible does not apply to you.

Initial Coverage

This stage begins after your total prescription payments reach your deductible. If your plan has a $0 deductible, this is the first stage that applies to you. During the initial coverage stage, you pay a copayment or coinsurance for prescription drugs until you reach the maximum total drug spend amount set by Medicare.

Coverage Gap

The coverage gap (“donut hole”) is a temporary limit on what your drug plan will cover for drugs. Not everyone will enter the coverage gap, but it’s important to understand how it could affect your drug costs.


In , the coverage gap begins when your total prescription costs reach . The coverage gap ends when your total out-of-pocket costs (except for premiums and certain other costs) reach . The coverage gap does not apply to members who are part of the Extra Help program.


During the coverage gap, you'll pay of the plan’s cost for covered brand-name prescription drugs and of the plan’s cost for covered higher cost generic drugs. You can find additional information on the coverage gap at medicare.gov.


Items that count toward your out-of-pocket costs in the Coverage Gap:

  • Your yearly deductible, coinsurance, and copayments.
  • The discount you get on brand-name drugs in the coverage gap.
  • What you pay in the coverage gap.

Items that don’t count towards the coverage gap:

  • Your drug plan premium.
  • Pharmacy dispensing fees.
  • Payments for drugs that are not covered by your plan.

Catastrophic Coverage

This stage begins when your out-of-pocket costs reach . Under catastrophic coverage, you pay only a small coinsurance amount or copayment for prescription drugs.


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