Around this time every year Center for Medicare and Medicaid Services (CMS) releases the benefit parameters for Part D’s “Defined Standard Benefit” plan, as well as the parameters for the Low-Income Subsidy benefits. All Medicare Part D plans use this as a base to determine drug plan coverage for the following year. With this in mind, let’s dive into the Defined Standard Benefits and use these parameters to help get a possible preview of how your client’s Medicare Part D plan coverage may change in 2022.
The aforementioned “Part D Benefit Parameters for Defined Standard Benefit” is the minimum allowable coverage for a Medicare Part D plan. However, this by no means implies there are no variations. CMS does allow Part D plans two offer alternatives, such as a $0 Initial Deductible. As we go over the information offered below, remember not all plans will be the same. We will only be covering the standard.
- Initial Deductible:
A standard change every year; the initial deductible will increase from $445 to $480 in 2022. - Initial Coverage Limit:
Along with the deductible to initial coverage limit will go up from $4,130 to $4,430 in 2022. - Out-of-Pocket Threshold:
Lastly, on the list of standard increases, the standard out of pocket will go up from $6,550 to $7,050 in 2022. - Coverage Gap:
Known as the “Donut Hole,” this represents the gap between their Initial Coverage Limit and the Out-of-Pocket Threshold. In the case of the 2022 Defined Standard Benefits, we are looking at a gap of $2,620 ($7,050 minus $4,430). However, as you may already know, this coverage gap is “Closed” as of 2020. We’ll go into more detail on this in the next section. - 2022 Donut Hole Discount:
In 2022 Part D enrollees will receive a 75% Donut Hole discount on the total cost of their brand-name drug purchased while in the Donut Hole; 70% is paid by the drug manufacturer, and 5% paid by their Medicare Part D plan. Along with this discount, the 25% the enrollee pays coupled with the 70% paid by the drug manufacturer both go towards the Out-of-Pocket Threshold.
As an example, with this discount, bridging the Defined Standard Benefits Donut Hole would cost you approximately $689.47. Much less than the previously discussed $2,620.
What about generic drugs? They will also get the %75 percent discount. However, only the 25% that is paid by the Medicare beneficiary will go towards the Out-of-Pocket Threshold. - Minimum Cost Sharing in Catastrophic Coverage:
In the Catastrophic Coverage Portion of benefits, the beneficiary will be charged $3.95 for generic drugs under $79, and 5% when the retail price is above $79. For the name-brand versions, it will be $9.85 for prices under $197, and 5% when the retail price is above $197. - Maximum Co-payments below the Out-of-Pocket Threshold for certain Low Income Eligible Enrollees:
Generic or preferred drugs will be $3.95, and all others will be $9.85 for 2022. Plain and simple.
As a Medicare broker, keeping up to date on these types of changes not only better prepares you for questions from your clients, but is also a good reminder of the options available when helping enrollees choose their plan(s). If you’d like to know more or are interested in similar topics, subscribe to our newsletter, and contact us any time.