Each year as we head toward the last quarter of the year, the Center for Medicare/Medicaid Services or ‘CMS’ announces changes to Medicare for the coming year. However, with the changes in 2025 having such a widespread impact, everyone has already been talking about it. We have already had seminars, webinars, in person conferences and analysts have put out videos earlier this year. Why does 2025 seem to have such a shock appeal? This is because Medicare will have the biggest change to Part D since its inception in 2006. So, what is coming up for 2025, and how could it affect you? Here is a sneak peak at the good and the potentially bad.
The Inflation Reduction Act – Round 3
There have been slight changes to Part D in 2023 and 2024 phased in by the Inflation Reduction Act of 2022. You may remember when insulin became affordable with generic insulins costing a maximum of $35 per month. And some may have noticed how their drug copays in the catastrophic phase went from a $3-$10 copay to $0 copay. This only affected approximately 20% of Medicare beneficiaries, ie. those on very high cost drugs or complicated drug regimens. However, the phase of the IRA slated to roll out in 2025 has a much greater impact. It is being called a ‘market disrupter’ and has potential ripple effects in other areas of coverage besides just drug costs. So what changes am I referring to? Read on, my friends…..
No More Donut Hole
Since the beginning of Part D coverage, there have been four phases of drug coverage. I wrote a whole separate blog dedicated to it. For history’s sake, check it out - https://www.cdi-cares.com/blog/how-to-decode-your-part-d-plan
However, the IRA is changing this landscape beginning in 2025. They are eliminating phase 3 – the Donut Hole or Coverage Gap. This phase occurred when the drug spend from you and the plan combined reached a certain threshold. You then paid higher prices or a higher share of the cost for brand name drugs. For most this was the biggest jump in costs and was frustrating. Well, it is gone! There will be only three phases in 2025 – Deductible, Initial Phase and Catastrophic Phase. Sounds awesome, and it is for some. Keep going….
New Cap on Drugs = $2000
The IRA is imposing a maximum out of pocket for drug costs for Medicare Beneficiaries of $2000 annually! This is a huge change from the maximum now being $8000 for drug expenses. This is going to save some people a lot of money and maybe even allow folks to take the crucial medications they need because they can theoretically afford it under this new annual cap. This is by far the biggest change in years and will likely cause major ripple effects in many areas of coverage. Why? This is a $6000 shift PER PERSON in costs. Drug prices are not going down. And Medicare is not paying more to cover those drugs for the beneficiaries. The added cost is going to be pushed onto the insurance companies and manufacturers. How do you think this may impact other benefits? Onward…..
M3P
Before I summarize the potential and projected ripple effects, let’s touch on another new initiative in 2025. M3P, and no that is not a Star Wars reference. M3P is the new Medicare Prescription Payment Plan. This is to help ‘smooth’ out the costs over the course of the year for certain beneficiaries whose costs will likely hit the $2000 cap. Beneficiaries can enroll in the M3P at the time they sign up for their new stand alone drug plan or Advantage Plan with drug coverage. Once you opt in to M3P, you will be issued a monthly payment plan to normalize drug costs and spread it over the course of the year. So, you will pay nothing at the pharmacy to pick up your drugs but will be billed monthly by the plan. You can also enroll in this plan anytime throughout the year, which helps if you get prescribed a new high-cost drug mid-year. To be clear, it doesn’t change the total cost of your drugs at all. It just spreads it out over the year, so you don’t have those big hits at the beginning of the year at the pharmacy. Ask your agent for more information when you meet during open enrollment!
Ripple Effect
These changes are going to be extremely helpful to some people. For those of you on a set of specialized and expensive drugs, this will be of great benefit. However, it is important to understand the impact for all. The cost shift of a 40% increase onto insurance companies isn’t going to sit well. Let’s be real, insurance companies are businesses. Just like hospitals and physician practices are businesses. Price increases are projected in other areas and potentially some ancillary benefits could be taken away to offset this increase in cost. At the time I write this blog, plans haven’t been finalized or shared. However, I want to prepare my clients and friends. The likely effect will be higher drug plan premiums (possibly double), less ancillary benefits on advantage plans such as fitness, over the counter allowances, dental and vision coverage, etc. The ripple is likely to even hit the supplement plans with large carriers that have the full menu – supplements, advantage plans and part d plans. They will want to spread the added cost around to not hit one area too hard. So, supplements like Plan G and Plan N may see large price increases again in 2025. And once again, beware of predatory calls and mailings. With market disruptions, a local agent is best!
CDI is here to help you through this entire maze. We can meet in person or virtually. Reach out if you would like more information. Email carrie@cdi-cares.com or check out www.cdi-cares.com for a contact page and other helpful blogs.
QUOTE OF THE DAY:
When you drop any new idea in the pond of the world, you get a ripple effect. You have to be aware that you will be creating a cascade of change.
