How will my Medicare prescription drug expenditures compare in 2022 to 2021?
In 2021, the Part D prescription medicine deductible was $445, and in 2022, it was increased to $480. Some plans have deductibles much below these amounts (or none at all), but in 2022, no plan can have a deductible higher than $480.
After you’ve paid your deductible, you’ll have to pay copays (a set amount) or coinsurance (a percentage of the cost) for your drugs until the total amount you and your plan have spent reaches the donut hole’s lower level, also known as the initial coverage limit.
Before we get into the precise donut hole changes for 2022, it’s important to note that changes in your Medicare Part D expenses can be caused by changes in your prescription needs, changes in the design of your plan, or a plan change made during open enrollment (October 15–December 7). Each year during open enrollment, it’s critical to evaluate the various alternatives to determine how your current plan — and the other plans available in your area — will cover your specific prescriptions for the future year. This can have a significantly bigger impact on your actual out-of-pocket expenses than the government’s typical administrative modifications to the Part D guidelines from year to year.
What happened to the ‘donut hole’ in Medicare?
Over the course of several years, Medicare’s Part D prescription drug coverage shortfall, or “donut hole,” was gradually plugged. For brand-name pharmaceuticals, the donut hole was closed in 2019, and for generic drugs, it was abolished in 2020. However, as we’ll see in a moment, the donut hole is still significant, and enrollees’ prescription expenses might fluctuate during the year depending on whether they enter the donut hole.
Prior to 2010, while in the donut hole, Medicare Part D users were liable for 100% of their medication expenditures. It was slated to be completely closed by 2020, according to the ACA, which began closing it in 2011. The donut hole for brand-name pharmaceuticals was closed a year ahead of schedule thanks to the Bipartisan Budget Act of 2018. In 2019, the donut hole for brand-name pharmaceuticals was closed, while the donut hole for generic drugs was not closed until 2020.
Even if the donut hole has been “closed,” it remains relevant. Depending on how their plans are organized, consumers may have different prescription expenses while in the doughnut hole. The donut hole continues to influence how costs are calculated to determine whether an enrollee qualifies for catastrophic coverage. All of this is covered in further depth here.
When the total cost of your prescriptions hits $4,430 in 2022 (it was $4,130 in 2022), the coverage gap begins. When your out-of-pocket costs (which include the large manufacturer discount for brand-name pharmaceuticals that applies while you’re in the donut hole) reach $7,050, up from $6,550 in 2021, you enter the catastrophic coverage phase (i.e., you exit the donut hole).
Because the percentage of costs that enrollees pay while in the donut hole is the same as the amount they pay before entering the donut hole if they have a basic plan design, the donut hole “closed” in 2020. (many plans have copays instead of coinsurance prior to the donut hole). This will be the case in 2022 as well.
Despite the fact that there is no longer a donut hole, where patients must pay more than 25% of the cost of their prescriptions after the initial coverage limit, drug plans might still have various cost-sharing levels below and above the initial coverage limit. For example, a medicine may have a $5 payment — or even a $0 copay — prior to the initial coverage limit, but a 25% coinsurance after that level. However, another prescription may have a copay that is roughly equal to 25% of its cost, resulting in roughly the same out-of-pocket spending before and after the initial coverage limit. It all relies on your treatment plan and the medications you take.
And, regardless of your plan’s design or prescription needs, there is still a variation in how drug expenditures are calculated toward the catastrophic coverage maximum.
If you reach catastrophic coverage, you’ll have to pay either 5% of the cost of each drug or a small copay for the rest of the year, whichever is higher. Each year, CMS sets the copays for medications in the catastrophic coverage level; in 2021, they will be $3.95 and $9.85, a little increase from 2021. Although prescription costs drop dramatically after a person reaches catastrophic coverage, if particularly expensive medications are required and the 5 percent coinsurance (rather than the copay) is used, they can quickly build up.
It’s vital to remember that many seniors do not hit the donut hole in a given year due to insufficient prescription prices. The deductible and copay or coinsurance below the donut hole will be the most critical factors in deciding how much money they spend on drugs for those patients.
Because Part D plans sometimes charge coinsurance (a percentage of the cost) rather than copays (a fixed amount), some seniors may discover that their expenditures increase from year to year when prescription drug prices rise. If you’re paying 25% of the cost, and the cost rises, your half rises with it. According to a Wall Street Journal investigation, the typical out-of-pocket cost of a Medicare Part D drug in 2015 was $117, up from $79 in 2011.
The good news is that there are a few simple things you can do to lower your Medicare prescription drug expenditures.