(First things first. For those who take expensive brand name or specialty medications, make it a point to check your 2025 plan’s published formulary/covered drug list for inclusion of your brand or specialty meds when the 2025 plan information is released in October……. Now, as the late Paul Harvey used to say, for the rest of the story…..)
Will the changes be good? Not so good?
Will we get something? Will we give something?
If this were a multiple choice test my answer would likely be
“D – All of the Above.”
2022’s Inflation Reduction Act (IRA) created the most significant changes in Medicare Part D Prescription Drug Coverage since the inception of Medicare Part D in 2006. The IRA aimed to lower prescription drug prices.
Some elements of the IRA were phased in over the last two years. By most accounts, mine included, those changes have impacted Medicare Prescription Drug coverage in a positive way.
However, by far the biggest changes will arrive in 2025. These new 2025 regulatory changes may significantly impact Medicare beneficiaries this year and over the longer haul.
In terms of “Pro” and “Con,” for Medicare enrollees, most of the changes will be “Pro.” One, maybe not so much, at least in the short term. Once the market has time to maneuver and adjust, the overall net change in future plan years will hopefully all accrue to the “Pro” side of the ledger.
Individual Part D Prescription Drug Plans (typically paired with Medicare Supplement Plans) and Medicare Advantage Prescription Drug Plans (MAPD) are all likely to be impacted to some degree.
So, what do the 2025 IRA changes include?
- Elimination of The Coverage Gap (aka “Donut Hole”). Starting in 2025, there will be only three stages of prescription drug coverage instead of four – the Deductible phase, Initial Coverage phase, and Catastrophic phase. The “Coverage Gap” is going away.
- Decrease in the Annual Prescription Drug Out-of-Pocket Maximum from $8,000 to $2,000. Beneficiaries will no longer have a cost share for covered drugs after the initial coverage stage.
- A new prescription drug payment program called the Medicare Prescription Payment Plan (aka M3P; aka “Copay Smoothing”). This program provides enrollees with the opportunity to spread their prescription drug costs over the entire year via a monthly payment plan.
- Reallocation of costs in the catastrophic stage. CMS (the government agency that manages Medicare) is shifting a big chunk of risk and financial responsibility away from Medicare and onto carriers and drug manufacturers.
The big reallocation of costs from Medicare to the carriers without anything in return to help balance out the increased liability is where the “Con” column comes into play. As I understand it, the liability for brand-name drugs shifts to the carriers by a factor of 3x. Generic costs shift to carriers by a factor of 2x. Conversely, Medicare’s liability for drug costs in the catastrophic phase drops from 80% to 20%
I believe all insurance carriers are affected by this significant increase in prescription drug liability. As a result, most plan structures and offerings will probably change to some degree to account for the significant increase in liability that’s being placed on the carriers.
Taking a stab at summarizing some things we’re likely to see …
All plans in 2025—both stand-alone prescription drug plans (typically paired with a Medicare Supplement Plan) and Medicare Advantage Plans—are likely to be affected in some way, shape, or form. The stand-alone Part D Prescription Drug Plans are likely to be impacted the most.
Generally speaking, enrollees may experience some measure of change in their coverage from 2024 to 2025 as a result of Medicare’s reallocation of costs. Some will be impacted more than others.
For example, changes may include:
- Overall, fewer stand-alone Part D Prescription Drug Plans will be available in 2025. Some carriers will shrink the number of plans they offer. A few carriers may exit the Medicare Stand-alone Prescription Drug Plan market altogether.
- In select pockets of the country, the number of Medicare Advantage Plans offered by some carriers may shrink.
- More plans are likely to now have either a full prescription drug deductible (i.e., stand-alone Part D plans) or a partial prescription drug deductible (i.e., Medicare Advantage Plans).
- All plans will likely experience an increase in prescription drug copays or coinsurance for brand and specialty medications (Tiers 3 through 5).
- All plans will have a $2,000 cap on out-of-pocket expenses for covered medications.
- Monthly premiums for stand-alone Part D Prescription Drug Plans are likely to increase, some by a lot.
- The $0 premium for most Medicare Advantage Plans is not likely to change. It’s anticipated that most will remain at $0. However, some MAPD plans may experience an increase in select copays. And an MA plan’s out-of-pocket maximum may go up. Some of the extra benefits may be reduced.
- Last but not least, there may be a reduction in the number of prescription drugs covered by a plan’s formulary. This especially relates to more expensive brand-name medications and specialty drugs. Those taking expensive medications may want to be especially mindful of this.
(Note: By regulation, all plans must continue covering at least two medications in each therapeutic class. Currently, some plans cover more than two. That may not be the case for your plan in 2025.)
For a smaller percentage of folks, the benefit changes may be material. A plan change may need to be contemplated if not mandated.
What’s the best thing to do?
Review your plan’s Annual Notice of Change (ANOC).
If you regularly take expensive brand-name or specialty medications, check your plan’s 2025 drug list. Then, go from there based on what’s best for you.
After all, all healthcare is personal.
(I bet you already knew that.)
If there are specific topics you’d like us to address in future issues please drop us a line at 65plus@bbginc.net with your suggestions.