Medicare Catastrophic Drug Coverage: The final phase

So-called catastrophic coverage (sounds like doomsday but it’s actually a good thing!) begins once you’ve made it through the coverage gap called the donut hole. In 2018, you will exit the donut hole once you have reached $5,000 in out-of-pocket costs (See last week’s blog for more details).

Catastrophic coverage is Phase 4, the final stage of Medicare prescription drug coverage. In this phase, your share of drug costs drops sharply. In 2018, you will pay around 5% of the retail cost of your covered drugs.

To remind you of the Medicare Part D phases:

1. Deductible (you pay all medication costs until you reach your deductible amount)
2. Initial coverage (you pay copays and coinsurance)
3. Coverage gap – the donut hole (when you reach $3,750)
4. Catastrophic coverage (when you reach $5,000)

Phase 4 is not:

The catastrophic coverage phase should not be confused with catastrophic health insurance. This is a type of coverage available under the Affordable Care Act. It is a high-deductible plan for people under 30 or for those who qualify for a hardship exemption.

It’s also not to be confused with a catastrophic illness. This is an illness that requires a prolonged hospital stay or recovery period, like a heart attack, leukemia, or a stroke.

How does Phase 4 work?

When you have reached the $5,000 mark in the donut hole, you will automatically receive catastrophic coverage. You do not have to do anything. You will be charged a small coinsurance amount or copayment for the drugs that are covered. And, this will continue until the end of the year.
This applies only to Part D prescription drug costs. You still have to pay premiums for your Medicare Part B plan.

Check out my information videos on YouTube. I wish you a happy and healthy New Year. ~ Keith

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