If you have Medicare Part D prescription drug coverage, your Medicare Part D coverage may include three phases. Whether you receive your prescription drug coverage through a stand-alone Medicare Part D Prescription Drug Plan (designed to work alongside your Medicare Part A and Part B coverage) or you belong to a Medicare Advantage Prescription Drug plan, the coverage phases are the same.
- Initial coverage period: This is the first phase of your Medicare Part D coverage. It begins when your plan coverage starts; please note that if your plan has a deductible, you must pay that amount before the plan starts covering your prescription drugs. The initial coverage period ends once you and your plan spend a combined amount of $4,130 in 2021 on covered prescription drugs. If you reach this point you move into the next phase of your coverage for the year.
- Coverage gap: Between the out-of-pocket spending amounts of $4,130 and $6,550 in 2021, you may be responsible for paying 25% of formulary-covered brand-name and generic medications. This coverage gap is also called the donut hole).
- Catastrophic coverage: If your out-of-pocket spending reaches $6,550 in 2021, you pay a small copayment or coinsurance for your medications; your plan will cover the rest of the incurred costs in this phase, which extends to the end of the calendar year. The following year, you begin a new benefit period.
While not everyone’s prescription drug use takes them through all three coverage phases, you may have a prescription to fill that moves you from one phase of coverage to another.
Perhaps you and your plan combined have paid $3,885 in prescription drug expenses thus far during the year. Suppose you now require a covered medication that costs you a $250 copayment. Filling that particular prescription will typically take you from the initial coverage period into the coverage gap phase. Because the prescription drug claim falls within two or more coverage phases, it is a “straddle” claim.
What are straddle claims?
Straddle claims are prescription drug claims that fall into two or more coverage phases at once, as described above. The amount owed by a beneficiary is calculated by a formula that tabulates which coverage phases a prescription drug claim straddles, and how the costs incurred by the prescription drug fall into each phase. So using the example above, the plan would calculate the dispensing fee (for the prescription drug) and gap discount to determine the beneficiary’s cost-sharing amount and the plan’s payment amount.