Medicare Part D Prescription Drug Plan Changes in 2021

Fact Checked
Published: 2/3/2021
Contributing Expert: Ron Elledge
Reviewed by: Caren Lampitoc

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Ron Elledge
Medicare Consultant and Author
Ron Elledge
Medicare Consultant and Author

Ron Elledge is a seasoned Medicare consultant and author of “Medicare Made Easy.” As a Medicare expert, he regularly consults beneficiaries on Medicare rules, regulations, and strategies.

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Caren Lampitoc
Medicare Consultant
Caren Lampitoc
Medicare Consultant

Caren Lampitoc is an educator and Medicare consultant for Medicare Risk Adjustments and has over 25 years of experience working in the field of Medicine as a surgical coder, educator and consultant.

Original Medicare covers 80% of Medicare approved services, hospital services through Part A and medical services through Part B. Outpatient prescription drugs are not included and have no coverage through Original Medicare. Medicare Prescription Drug Coverage is available through Medicare Part D Plans which are designed to help Medicare beneficiaries pay for a portion of the cost of self-administered prescription drugs.

Part D (PDP) plans are subject to change in many areas each year as authorized by CMS. Some of these changes will affect the entire population of Medicare recipients, while others will affect only a select few. See what’s new in 2021.

Medicare Part D Differences for 2021

Part D Premiums: Prescription Drug Plans (PDP) are marketed by private insurance companies approved by the Centers for Medicare and Medicaid Services (CMS). They offer a variety of Part D plan options with a broad range of premiums. The average premium for a basic stand-alone Medicare Part D Plan is $33.06 per month in 2021. This is up from $32.74 in 2020.

Part D Deductible: Deductible refers to the amount the plan member must pay out of pocket before the plan begins to pay its part of the drug costs. The deductible amount that must be paid before the plan’s copays and coinsurance kick in will carry a maximum of $445 in 2021, this is up from $435 in 2020. Plans may charge a lower, or even $0, deductible but cannot exceed the maximum of $445 for 2021.

Part D Copayments and Coinsurance: Medicare is rolling out the Part D Senior Savings Model for 2021 and it is great news for diabetics on insulin. In participating plans, this five-year test program will cap the price beneficiaries pay for many types of insulin to a $35 copay for a 30-day supply.

Nationwide, about 1,700 MAPD plans have signed on to this program and Medicare anticipates many more to follow in the coming years.

Changes to the Four Stages of Drug Medicare Part D Drug Coverage

Before we look at the cost changes surrounding the donut-hole for 2021, I believe we must understand the yearly migration through the four stages of drug coverage.

Stage 1: Yearly Deductible: While in this stage, you pay the full cost of all covered drugs that have not been excluded from the deductible. You stay in this stage until your Yearly Deductible is met. Some plans exclude Preferred and Non-Preferred Generic drugs from the 2021 yearly deductible.

Stage 2: Initial Coverage: During this stage, the plan pays its share, and you pay your share of the cost of your drugs. You stay in this stage until your year-to-date “total drug costs” (your payments plus any Part D plan payments) total the initial coverage limit of $4,130 for 2021, an increase of $120 from $4,020 in 2020.

Stage 3: Coverage Gap, also known as Donut Hole: The maximum allowable charge for a covered drug during this stage, whether brand-named or generic, will be 25% in 2021. You stay in this stage until your year-to-date true out-of-pocket costs (TrOOP) reach a total of $6,550 for Plan year 2021 (an increase from $6,350 in 2020) and then move to Stage 4.

Stage 4 is Catastrophic Coverage: During this stage, the Plan will pay most of the cost of your drugs for the rest of the year. You enter Stage 4 of your Medicare Part D Plan when you leave the donut hole. For the remainder of the year, out-of-pocket costs are capped at the greater of 5% of the cost of the drug or a copay of $3.70 for generics and $9.20 for brand-name drugs. Both of these amounts are a slight increase from 2020.

True Out of Pocket Cost Changes in 2021

After your TrOOP costs reach $6,550 in 2021, up from $6,350 in 2020, you’ll enter the catastrophic phase. TrOOP includes all payments you have made, and payments others (except for the insurance company) may have made on your behalf, for medications listed on your plan’s formulary and purchased at network or participating pharmacies.

What You Need to Know About Income-Based Surcharges

How much will IRMAA add to my Part D costs in 2021?

Income Related Monthly Adjustment Amounts (IRMAA) is an additional charge which is based on your yearly income and determined by your tax bracket and filing status. The calculated amount is then added to your monthly Medicare Part B and or Part D premiums. Each year Social Security calculates and adjusts the IRMAA amount to apply to Medicare beneficiaries who have incomes higher than their threshold determination.

Unlike Part B, there is no standard monthly premium for Part D plans. The company offering the policy in conjunction with CMS will determine monthly premiums. The IRMAA is then added to the premium amount charged and goes to Medicare, not your plan’s provider.

The table below provides information on the Part D surcharge amounts for 2021.

IRMA Surcharges for Medicare Part D in 2021

Yearly income in 2019: individual

Yearly income in 2019: married, filing jointly

Yearly income in 2019: married, filing separately

Yearly income in 2019: Part D monthly premium for 2021

≤ $88,000

≤ $176,000

≤ $88,000

your regular plan premium

> $88,000 — $111,000

> $176,000 — $222,000

> $176,000 — $222,000

your plan premium + $12.30 from $12.20 in 2020

> $111,000 — $138,000

> $222,000 — $276,000

> $222,000 — $276,000

your plan premium + $31.80 up from $31.50 in 2020

> $138,000 — $165,000

> $276,000 — $330,000

> $276,000 — $330,000

your plan premium + $51.20 up from $50.70 in 2020

> $165,000 — <$500,000

> $330,000 — $750,000

> $88,000 — <$412,000

your plan premium + $70.70 up from $70.00 in 2020

≥ $500,000

≥ $750,000

≥ $412,000

your plan premium + $77.10 up from $76.40 in 2020

Visit Medicare Part D Enrollment to learn more about Medicare Part D and how it works.