October 6, 2016
If you have Medicare Part D prescription drug coverage, your Medicare Part D coverage includes 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 your costs and your plan payments reach a combined amount of $3,750 in 2018. At this point you move into the next phase of your coverage for the year.
- Coverage gap: Between the out-of-pocket spending amounts of $3,750 and $5,000 in 2018, you may be responsible for paying 40% of formulary-covered brand-name prescription drug costs, and 51% of the costs of formulary-covered generic medications. This coverage gap is also called the donut hole).
- Catastrophic coverage: If your out-of-pocket spending reaches $5,000 in 2018, 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 $3,600 in prescription drug expenses thus far during the year. You find that you require a covered medication that costs $250. Filling that particular prescription will take you from the initial coverage period to 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.