Table of Contents:
- What Changes Were Made for 2021?
- How Will These Changes Affect Cost and Coverage?
- Other Notable Fluctuations
Medicare Part D (also called Medicare Prescription Drug Coverage) is an optional coverage plan that helps Medicare beneficiaries pay for prescription drugs. While Part D plans must be Medicare-approved and work alongside Original Medicare (Parts A and B), every Part D plan is privately offered. Therefore, you do not purchase these plans through the Medicare system directly, but through independent insurance providers. As a result, unlike Parts A and B, there are multiple plans to choose from no matter where you reside.
What Changes Were Made for 2021?
The Centers for Medicare and Medicaid Services (CMS) announced several changes that went into effect for Part D plans on January 1st, 2021.
The following will affect all standard Part D plans:
Deductible Limit Increased by $10
The deductible is the amount of money you must pay out-of-pocket before your plan begins to cover a portion of your costs. In 2020, the Deductible Limit for standard Part D plans was $435 for the year. In 2021, this number increased to $445. Once you reach the $445 threshold for the year, your initial coverage will kick in.
Initial Coverage Limit Increased by $110
The Initial Coverage Limit is the maximum amount you and your drug plan spend on covered drugs (combined and including your deductible) before you reach a coverage gap called the Donut Hole. In 2020, the Initial Coverage Limit was $4,020. In 2021, this number increased to $4,130. When you reach this threshold, you will enter the Donut Hole, which means there is a temporary limit on what a drug plan will cover for drugs. While in the Donut Hole, you will have to pay 25% of the total cost of the retail value of all prescriptions you receive that are covered by your plan. This will continue until you qualify for Catastrophic Coverage.
Out-of-Pocket Cost Threshold Increased by $200
The Out-of-Pocket Cost Threshold is the maximum amount of money you will have to spend in a given year before your plan will cover all future costs. In 2020, this amount was $6,350. In 2021, this number increased to $6,350.
Senior Savings Model Introduced
The new Senior Savings Model is designed to save Part D beneficiaries money on insulin costs. According to the CMS, one in every three Medicare beneficiaries has diabetes, so this new price cap will be significant. Insulin will now be available to Medicare Part D beneficiaries for a copayment of $35 per 30-day supply. This means the yearly cap on insulin will be just over $420, which is a decrease in cost of 66% compared to the average cost of insulin through Part D plans in 2020. According to the CMS, this initiative will save beneficiaries who are daily users of insulin an average of $446 per year. Not all Part D plans will adhere to this model, but there is at least one such plan offered in every state. In fact, 1,635 plans, covering all 50 states and Puerto Rico, adhere to the new Senior Savings Model.
Premiums Decreased by $2.24 Per Month
The average Part D premium for 2021 is $30.50 per month, which is a decrease of $2.24 cents compared to last year’s average of $32.74. This means that the average yearly cost of a Part D premium decreased by $26.88. Be advised that there is a penalty applied to Part D premiums if you do not sign up when first eligible for Medicare, so this number could be higher depending on your penalty status.
How Will These Changes Affect Cost and Coverage?
This depends on the plan selected by a beneficiary. Since certain plans offer varying drug formularies for varying costs, and copayments can differ depending on the plan, these general changes to the Part D model will affect different plans in different ways.
Apart from the Senior Savings Model, each of the changes listed above shift the costs associated with the Donut Hole. Through a standard Part D plan, you will have an extra $110 of covered costs (the increase in the Initial Coverage Limit) before you reach the Donut Hole. If you do reach this limit, however, you will have to spend an extra $200 to exit the Donut Hole (the change in out-of-pocket cost threshold) before your Catastrophic Coverage covers all remaining costs for the year.
Other Notable Fluctuations
Certain Medicare Advantage plans, such as HMO and PPO, include Part D coverage. Like Part D, these plans adjust their respective costs and coverages annually. Therefore, it is wise to be informed of any changes made to these plans to determine if it would ultimately save you money to transition during your next available opportunity.