Merck Manual

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How Medicare Part D Works*

How Medicare Part D Works*

Stage

Amount Insured Member Pays During Stage

Trigger to Move to Next Stage

1. Deductible

All drug costs

Meet plan's deductible ($0-$445)

2. Initial Coverage

Fixed co-payments or co-insurance

Reach $4,130 in covered drug costs (considered as the out of pocket payments plus amounts paid by insurance)

3. Coverage Gap (Donut Hole)

Generic drugs: 25%

Brand-name drugs: no more than 25%

Reach $6,550 in out-of-pocket costs (includes costs for covered drugs paid since the beginning of the year plus the value of discounts† received on brand-name drugs while in this stage)

4. Catastrophic Coverage

Generic drugs: the greater of $3.70 or 5%

Brand-name drugs: the greater of $9.20 or 5%

* Data shown are for 2021 and may be different after that year.

† For brand-name drugs, there is typically a manufacturer discount of about 50% of the price. This amount is counted as part of the out-of-pocket cost, which will help people get out of the coverage gap sooner.