Medicare Part D Costs in 2020

How to Budget Your Prescription Drug Expenses

pharmacist helping an elderly man

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Before 2006, Medicare did not cover prescription medications, at least not most of them. A limited number of medications were offered under Medicare Part B, but otherwise, you had to pay for your medications out of pocket.

That all changed when President George W. Bush passed the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) in 2003. The law created what we now know of as Medicare Part D, an optional part of Medicare that provides prescription drug coverage.

Part D plans are run by private insurance companies, not the government. However, the federal government sets guidelines on what basic medications these plans must cover and on how much you can be charged. This guide outlines all you need to know about what you will pay for Medicare Part D this year.

Part D Deductibles

A deductible is the amount of money you spend out of pocket before your prescription drug benefits begin. Your plan may or may not have a deductible. The maximum deductible a plan can charge for 2020 is set at $435, an increase of $20 from 2019.

Part D Premiums

A premium is the amount of money you spend every month to have access to a health plan. The government sets no formal restrictions on premium rates and prices usually rise every year. That is not the case this year. In 2020, the basic premium for the minimum Part D plan is set at $32.74 per month, a decrease from $33.19 in 2019. Plans with extended coverage may cost more.

Part D National Base Beneficiary Premium

Do not confuse the national base beneficiary premium (NBBP) with your monthly premium. Although the numbers could technically be the same, they rarely are. The NBBP is a value used to calculate how much you owe in Part D penalties if you sign up late for benefits. Your best bet is to avoid Part D penalties altogether, so be sure to use this handy Medicare calendar to enroll on time. The NBBP is set at $32.74 in 2020, a decrease from $33.19 in 2019.

Part D Income-Related Medicare Adjustments Amounts

The government also charges you extra for Part D coverage based on your income. This is known as Income-Related Medicare Adjustments Amounts (IRMAA). You will pay monthly IRMAA to the federal government as well as monthly premiums to the insurance company. In 2018, IRMAA changed the categories of income so that more people would be required to pay a surcharge. In 2019, they added an extra income category. In 2020, they increased the income categories for inflation. (The exact IRMAA costs have not yet been released by the Centers for Medicare and Medicaid Services.) If you do not pay your IRMAA in a timely fashion, your Part D plan could be canceled. 

2019 Part D IRMAA for Individuals
Income Category Your 2019 Costs Change from 2018

Less than $85,000

$0 per month

No change

$85,000 - $107,000

$12.40 per month

$148.80 per year

$0.60 decrease per month

$7.20 savings per year

$107,000 - $133,500

$31.90 per month

$382.80 per year

$1.70 decrease per month

$20.40 savings per year

$133,500 - $160,000

$51.40 per month

$616.80 per year

$2.80 decrease per month

$33.60 savings per year

$160,000 - $500,000

(More than $160,000 in 2018)

$70.90 per month

$850.80 per year

$3.90 decrease per month

$46.80 savings per month

More than $500,000

(More than $160,000 in 2018)

$77.40 per month

$928.80 per year

$2.60 increase per month

$31.20 increase per year

2019 Part D IRMAA for Married Couples Filing Jointly
Income Category Your 2019 Costs Change from 2018

Less than $170,000

$0 per month

No change

$170,000 - $214,000

$12.40 per month

$148.80 per year

$0.60 decrease per month

$7.20 savings per year

$214,000 - $267,000

$31.90 per month

$382.80 per year

$1.70 decrease per month

$20.40 savings per year

$267,000 - $320,000

$51.40 per month

$616.80 per year

$​2.80 decrease per month

$33.60 savings per year

$320,000 - $750,000

(More than $320,000 in 2018)

$70.90 per month

$850.80 per year

$3.90 decrease per month

$46.80 savings per month

More than $750,000

(More than $320,000 in 2018)

$77.40 per month

$928.80 per year

$2.60 increase per month

$31.20 increase per year

2019 Part D IRMAA for Married People Filing as Individuals
Income

Your 2019

Costs

Change from 2018
Less than $85,000 $0 per month

$0 increase per month

$85,000 - $415,000

(More than $85,000 in 2018)

$70.90 per month

$850.80 per year

$3.90 decrease per month

$46.80 savings per year

More than $415,000

(More than $85,000 in 2018)

$77.40 per month

$928.80 per year

$2.60 increase per month

$31.20 increase per year

The Donut Hole

Medicare Part D is far from perfect. In fact, it has a big hole in it. The so-called donut hole is a coverage gap that occurs after you and Medicare have spent a certain amount of money on your prescription medications. After that amount is spent, you are left to pay for your medications on your own until you spend enough to earn "catastrophic coverage" through your Part D plan.

The donut hole closes in 2020 thanks to the Affordable Care Act, aka Obamacare. Starting in 2013 regulations in the Affordable Care Act gradually decreased how much you would be forced to spend out of pocket on your medications. Starting in 2020, you will not be allowed to pay more than 25% of the retail costs for your drugs. This is the maximum amount you pay in the initial coverage limit as well.

The amount that you pay before you enter the donut hole, known as the initial coverage limit, increased from $3,820 to $4,020 in 2020. This is great news. It means that it will take longer before you enter the coverage gap.

Once you are in the donut hole, instead of paying your usual Part D copayment amount, you will pay 25% for all medications. The remaining 75% will be paid by the pharmaceutical manufacturer and your Part D plan. The manufacturer will pay 50% of the cost towards brand-name but not generic drugs. Any leftover costs are covered by your Part D plan.

For example, if a brand-name drug costs $100, you will pay $25, the manufacturer $50, and your drug plan $25. For a generic drug, you will pay $25 and your Part D plan will pay $75.

You will spend $2,330 in the donut hole for 2020, a $1,050 increase from 2019. After you have spent this amount, you enter the phase of catastrophic coverage where you will pay only $3.60 for generic drugs and $8.95 for brand-name medications each month or 5% the cost of those drugs, whichever costs more.

A Word From Verywell

Prescription medications can be costly but don't let that intimidate you. Know what your Medicare Part D plan covers and how much you can expect to pay. With this information in hand, you can budget for the year ahead and keep any surprises at bay. 

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Article Sources

  • Costs for Medicare Drug Coverage. Medicare.gov. https://www.medicare.gov/part-d/costs/part-d-costs.html.