The Four Coverage Stages of Medicare’s Part D Program
Stage 1 ⟹ ANNUAL DEDUCTIBLE
Begins with your first prescription of the plan year. After that, you pay the full cost of your prescriptions until your spending adds up to your deductible amount. So, if your plan has a $0 deductible, you skip straight to the next stage.
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Stage 2 ⟹ INITIAL COVERAGE
Begins immediately if your plan has no deductible OR when the prescription payments you have made equal your plan's deductible.
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Stage 3 ⟹ COVERAGE GAP
Begins when you and your plan have collectively spent $4,430 on your covered drugs. Not everyone will enter the coverage gap (also referred to as the "donut hole").
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Your out-of-pocket cost is calculated by adding all of the following:
Yearly deductible
Coinsurance
Copayments from the entire plan year
What you paid for drugs in the coverage gap (including the discounted amounts you did not pay in that stage).
Stage 4 ⟹ CATASTROPHIC COVERAGE
Begins: when your out-of-pocket costs reach $7,050 on covered drugs.
After your out-of-pocket cost totals $7,050, you exit the gap and get catastrophic coverage.
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