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Know Your Plan: Annual Out-of-Pocket Threshold

To limit enrollees' total out-of-pocket costs for medications, the Medicare drug benefit provides additional help when an enrollee pays more than the out of pocket threshold. Once an enrollee has spent a certain amount out of pocket in a year ($4,050 in 2008), the enrollee's copayment will be much lower for the remainder of the year. The threshold will go up each year to reflect inflation. The enrollee must meet that out-of-pocket amount each year before the enhanced benefits begin.

Therefore, if a drug plan denies coverage of your medication, it is important to request a coverage determination, rather than just to pay for it out-of-pocket. If you just pay for it, your payment will not count towards your out-of-pocket threshold. However, if you request coverage through the Medicare appeal process and win, the amount of your copay will count towards your out-of-pocket threshold.