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Medicare Part D is a part of Medicare designed to offer prescription drug coverage to Medicare beneficiaries. You can get this coverage as a standalone prescription drug plan with Original Medicare Part A and Part B or included in a Medicare Advantage plan.

Like any other insurance policy, you typically pay a monthly premium for your Medicare Part D coverage. And, while Medicare Part D is optional, if you don’t enroll when you first qualify, you may pay a late enrollment penalty when you later decide to sign up. 

To help you understand this part of Medicare even further, let’s take a look at how Medicare Part D works.

Phases of Medicare Part D

Medicare Part D prescription drug plans have four phases. These four phases include:


Medicare Part D plans have an initial deductible you are required to meet before your coverage can kick in. The annual Part D deductible in 2021 is $445, but do keep in mind that some Part D plans can have a deductible that is lower than this. Some Medicare Part D plans may not even have a deductible at all.

Do note, though, that if your plan has a deductible, you will have to pay in full for your prescriptions until that initial deductible is met.

Initial Coverage

Once you meet your deductible, you move to the next phase, which is the initial coverage period. During this phase, your plan will cover some of the costs of your prescriptions, and you will pay either a coinsurance or copayment. The amount of time you stay in this phase will depend on the structure of your plan and the drug costs. 

For many plans, this phase will end as soon as you and your plan together have accumulated $4,130 (as of 2021) in drug costs.

Coverage Gap

Once you reach that amount, you will then enter the coverage gap phase. This is also known as the donut hole. You will only pay 25% of the cost of your drugs when you reach the coverage gap phase.

Catastrophic Coverage

Once you have reached a total of $6,550 in out-of-pocket costs for your covered prescription drugs, you will then enter the catastrophic phase. During this phase, you will be responsible for paying any copayments or coinsurance, but they will be much less expensive for the rest of the calendar year. The costs that will help you reach this phase include the deductible and other costs you personally paid towards your prescriptions. Your premiums and the costs your plan paid for your prescriptions will not count towards this phase.

Want To Know More About Part D?

If you have any questions about Medicare Part D prescription drug plans, please don’t hesitate to contact World Financial Solutions. We are your trusted Medicare experts, and we’d love to help!