Your Drug Plan or Medicare Advantage Plan with Drug Coverage is Changing in 2025.
In September, you will receive your Annual Notice of Change (ANOC.) Even if you’re happy with your current plan and usually automatically renew, this is not the year to do that! All standalone Part D plans and Medicare Advantage plans with Prescription Drug coverage are going to make changes to their formularies and/or benefits because of the Inflation Reduction Act.
Part of the Inflation Reduction Act, signed into law in 2022, intends to lower drug costs for those on Medicare, which is good. Some of the preliminary unintended consequences for Part D beneficiaries may be bad.
You’ve likely heard of some of the changes that have already been implemented in 2024, such as the $35 cap on insulin and the expansion of Low-Income Services, also known as Extra Help, to 150% of the federal poverty level.
Beginning in 2025, the coverage gap, or donut hole, is going away and the legislation adds a hard cap on beneficiary out-of-pocket spending on Part D drugs at $2000. The law also reduces Medicare’s liability for spending above the out-of-pocket cap. Medicare’s share of total costs above $2000 will decrease from 80% to 20% from brand-name drugs and to 40% for generic drugs. Medicare Part D plans’ share of costs will increase from 15% to 60% for both brands and generics above the $2000 cap, and drug manufacturers will be required to provide a 20% discount on brand-name drugs. The legislation also requires manufacturers to provide a 10% discount on brand-name drugs between the deductible and annual out-of-pocket spending cap, replacing the 70% price discount in the coverage gap phase under the current benefit design.
What does that mean? Part D beneficiaries who are spending more than $2000 a year on their prescriptions are going to be happy, so this will be good for approximately 4% of the Part D population. The other 96% will likely be pitching in on this in the form of higher Part D premiums, drug formulary changes, more utilization management, more step therapy, and potentially decreased Medicare Advantage ancillary benefits. (According to KFF.org, in 2021 1.5 million out of 39 million on Part D paid more than $2000 for their prescriptions.)
It was starting to get ugly. Some standalone drug plans are leaving the market in 2025. Several Medicare Advantage companies are reducing their footprint and have announced changes to their benefits to compensate for increased costs of the drug coverage. The national average bid amount for Standalone Drug Plans increased from $64.28 in 2024 to $179.45 in 2025. However, on July 31, 2024, after CMS (the Center for Medicare and Medicaid services) received the initial bids from the drug companies and perhaps realized that the good intentions of the Inflation Reduction Act may have the bad result of beneficiaries not enrolling in the higher cost plans at all, CMS introduced “Voluntary Part D Premium Stabilization Demonstration.” In a nutshell, there is a new rebidding process happening at the time of this writing, and agents and beneficiaries are now a little more hopeful that the Drug premiums won’t be as negatively impacted as originally projected.
This will be good for the beneficiaries: another big change with the 2025 plans that will help those on higher cost drugs is known as the Smoothing/MP3/Medicare Prescription Payment Plan: Patients must be given the option to pay for their out-of-pocket prescription costs in monthly installments, with a monthly limit on spending. This monthly payment plan will be set up with the Insurance company, and not with the pharmacy. Enrolling in the Medicare Prescription Payment plan is optional. The pharmacy will inform the enrollee about the program and provide the “Medicare Prescription Payment Plan Likely to Benefit Notice.” The plan does not cover Part B drugs or medications not listed on the member’s plan formulary. Once beneficiaries opt into the program, their insurance carrier will distribute their prescription drug costs over the remaining months of the plan year, eliminating the need for payment at the pharmacy.
Note: this monthly Medicare Prescription Payment Plan program does not reduce the amount of money that an individual pays in annual out-of-pocket costs; it helps individuals with high costs spread those costs out throughout the plan year. The Medicare Savings Programs and Medicare’s Part D Low Income Subsidy (also called LIS/Extra Help) are programs that help reduce costs for individuals who qualify based on income and resource limits, individuals are strongly encouraged to check their eligibility for these programs before they consider enrolling in the Medicare Prescription Payment Plan.
As before, grants will still be allowed to be counted towards the TrOOP (True Out Of Pocket Costs) in 2025. If you apply for a grant and are approved, the prescription will be processed through your insurance first, then to the grant. The grant money can be used to pay your drug deductible, copay, and coinsurance. The amount paid by the grant, on your behalf, counts towards your true out of pocket costs (TrOOP), so it is possible to reach the catastrophic level although you are paying little to nothing for the medication. If/when you hit the catastrophic level, all of your formulary medications will be zero for the remainder of the year.
New plan information for 2025 will not be available until October 1st 2024. Your agent or SHIP counselor is going to be busy and backlogged. Make your appointment now for after October 1st. Changes can be made between October 15th – December 7th 2024 for January 1st, 2025. If you miss reviewing your plan and you’re on a standalone drug plan and get surprised in 2025, you won’t be able to make any changes until the following year. If you’re on a Medicare Advantage plan and get surprised after the first of the year, you have an additional window to make changes January 1st to March 31st for the following month. Good luck! And here’s to all your changes in your plan being good and not bad, nor ugly.
Mary Hiatt is President of Mary the Medicare Lady (A non-government entity.) She is a member of a pharmacist-led organization that helps her clients source savings for medications. She offers Educational Workshops on Medicare, Drug Savings, How to Stop Phone Calls, and more at no charge. Not connected with or endorsed by the U.S. government or the federal Medicare program. See www.hiattagency.com or contact licensed independent agent mary [at] hiattagency [dot] com or call or text 402 672 9449 for more information.