The Inflation Reduction Act was signed into law on August 16, 2022. It is written as a 10-year plan, with various changes slowly implemented throughout that timespan. As an overview, the Inflation Reduction Act focuses on expanding renewable energy, addressing air pollution, access to clean water, aiding vulnerable populations and bettering Medicare.
One of the legislation’s goals with the Inflation Reduction Act is to improve Medicare prescription drug coverage in a number of ways. Some of the changes being made in an attempt to accomplish this goal will begin being implemented in 2025.
It has been announced that there will be some Structure Changes to Part D Prescription Drug Plans in 2025. These changes are a welcome relief for many Medicare beneficiaries who have historically experienced the difficulty that high prescription drug costs can bring.
Donut Hole
You may be familiar with a prescription coverage gap that has been in place up until now, commonly referred to as the “donut hole.” This coverage gap put a temporary limit on what a member’s drug plan would cover once the member and their plan spent a certain amount of money. In 2025, the donut hole will be eliminated.
$2,000 Maximum Out-Of-Pocket
We will now see a $2,000 maximum out-of-pocket for the first time ever. Members will pay 100% of all expenses until they reach the Part D deductible, then they will pay the initial coverage phase copays up until this max-out-of-pocket is reached. Once members reach this $2,000 threshold, they will enter into what is called the “catastrophic phase” and will not owe anything for the prescription drugs they receive throughout the rest of the year. Not all members will have prescription costs high enough to reach the $2,000 max-out-of-pocket, but it will help those that historically exceed that amount.
Smoothing Provision
In an effort to “smooth” high-cost expenditures over the year, members will be able to opt into a monthly payment program for their prescription drugs. Rather than having months where costs are heightened, this “Smoothing Provision” is being implemented so that costs can be spread out more evenly over the year.
Starting in 2025, drug manufacturers and Part D plan sponsors will be responsible for more of the cost of prescriptions than ever before. The cost to Medicare itself will decrease and so will the cost for beneficiaries who have historically had higher than average prescription drug costs.
While the true results of these changes are still unknown, the expectation is that plans will spread this increased cost around by increasing premiums, reducing plan offerings and making changes to their formularies. Sponsors may change the tiers of certain prescriptions and/or stop covering some prescriptions altogether. We have also already started to see a few plans slated to exit the market in 2025.
*Remember, these are all expectations, not yet known facts, and will not necessarily affect all Part D members. The true effects of the Inflation Reduction Act changes will become more clear as we get closer to annual review time. This year, it will be as important as ever to review your prescription plan choice with your SBS agent to ensure you’re on the right plan for your unique needs.
Plans are still being finalized by carriers, but similarly to some of the anticipated stand-alone prescription drug plan changes we mentioned in our last section, some expected changes we may see in Medicare Advantage Plans come 2025 are:
Potential Premium Increases
Many Medicare Advantage Plans have a $0 premium. Carriers have the goal to keep those plan’s premiums stable at $0. Medicare Advantage Plans have more options to spread out cost than stand-alone prescription plans do, so we expect that to help with keeping these premiums at $0. However, we might see some premium increases to plans that already have a premium above $0.
Overall Benefit Adjustments
To help manage the increased cost of prescriptions, plans are expected to adjust their overall benefits. We expect to see plans increase some copays and reduce certain ancillary benefits.
Formulary Redesigns
Similarly to stand-alone prescription drug plans, Medicare Advantage Plans may adjust their drug formularies. They may change the tiers of certain prescriptions and/or stop covering some prescriptions altogether. We are also seeing a few plans exit the market due to these upcoming cost increases. However, we won’t know the final details of your specific plan until Annual Notices of Changes are released come September. You should receive this directly from your Medicare plan provider and it will outline exactly what changes you can expect when it comes to your specific cost and coverage.
If you’ve made it to Part 5 of this series, thank you for sticking with us! We hope this series has been informational and helpful. We also hope we have made it abundantly clear that you’re in good hands as we navigate these next couple of months together.
Next Steps:
Please be on the lookout for your Annual Notice of Change (ANOC) letter. This notice comes directly from your Medicare plan provider and is typically mailed in September. Regardless of any speculation there may be surrounding plan changes, it will NOT be clear what your specific coverage will look like for 2025 until those letters are released.
Beware of Ads + Scams:
Advertisers know there are many individuals with confusion surrounding changes that are occurring and will try to capitalize on it. At SBS, we are a brokerage and represent a majority of the plans you may be familiar with or see ads for, and are able to compare those options for you. Remember, if something seems too good to be true, it likely is! Please don’t give your information out to anyone you don’t know, and be sure to contact us first with any curiosities or questions.
Scheduling Your Annual Review:
Fall is right around the corner which means it is almost time for your annual review! Coverage options change, personal needs change, and there is no “one plan fits all.” As individuals, all of our needs/wants are vastly different and may change from year to year. AEP occurs from 10/15 – 12/7, and for many, is the only time you are able to make changes to your plan for the following year. This does not mean you HAVE to make any changes to your coverage, but Medicare.gov suggests reviewing your options annually — just in case! This year especially, it will be more important than ever.
Our Inflation Reduction Act series may be coming to an end, but we realize you may still have questions or concerns. If you are a client of ours, your personal SBS agent will be reaching out soon, either by phone, email, or physical mailer to outline what your next steps are when it comes to scheduling your annual review with them. If you are not currently a client of SBS and would like to meet with one of our Licensed Insurance Agents to discuss any of this, we would love to help!
1-800-627-2768 | CustomerService@sbsteam.net
A non-government entity. Not affiliated with or endorsed by any government agency. We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov or 1-800-MEDICARE to get information on all of your options.