2025 Part D Program Changes
For 2025, there will be changes to the Part D program because of the Inflation Reduction Act, impacting both stand-alone Part D and Medicare Advantage Prescription Drug Plans.
Inflation Reduction Act
The Inflation Reduction Act (IRA) was signed into law on August 16th, 2022. The law includes provisions that are focused on lowering prescription drug costs for people with Medicare and reducing costs to the Federal Government.
These regulations include a redesign of the Part D program for 2025.
2025 Changes to Part D
Part D Benefit Redesign:
Elimination of the Coverage Gap (“donut hole”)
- Deductible Stage: If your plan has a prescription drug deductible, you will pay the full cost for your drugs until you reach the deductible amount; then you move to the Initial Coverage stage.
- Initial Coverage Stage: In this stage, you will pay your plan copays or coinsurance, and the Part D plan (or Drug Manufacturers) will pay the rest. Once you, and others on your behalf, have paid a combined total of $2,000 (including any amounts paid toward a deductible), they move to the Catastrophic Coverage stage.
- Catastrophic Coverage Stage: Finally, you won’t pay anything for Part D-covered drugs for the rest of the plan year. The Part D plan will be responsible for most costs in this stage.
Reallocation of costs in the Catastrophic stage
In 2025, the cost responsibilities in the Catastrophic stage have shifted. Medicare now pays a smaller portion of the costs (20% for brand, 40% for generics) and the Part D plan will be responsible for paying a higher share of the costs (60% in 2025 vs. 20% in 2024).
So, those who typically reach the coverage gap may benefit from lower out-of-pocket costs in 2025.
$2,000 maximum true out of- pocket (TrOOP)
Starting in 2025, there is a new $2,000 annual true out-of-pocket maximum (TrOOP), reduced from $8,000 in 2024. TrOOP is the out-of-pocket drug cost that accumulates during the Deductible and Initial Coverage stages. As a result, you may reach the Catastrophic stage more quickly (where you will have no drug cost responsibility) due to the elimination of the Coverage Gap and the lower TrOOP.
The Part D Plan will calculate the TrOOP accumulation behind the scenes to determine when you will move to the Catastrophic stage.
The amount that is applied towards your TrOOP is the greater of the amount you paid based on their plan’s benefit design OR the cost share that you would have under Medicare’s Defined Standard Part D Plan.
The Defined Standard Part D Plan is CMS’ minimum benefit requirement for a Part D offering (either as a stand-alone PDP or within a MAPD plan).
The Medicare 2025 Defined Standard Part D Plan Design is a $590 Rx Deductible and a 25% Cost-Share.
Some plans may offer an enhanced Part D benefit instead of a Defined Standard benefit. Folks on these plans may see their TrOOP accumulation differ from their actual out-of-pocket costs.
Example 1
Your plan cost-share is $15, but the Defined Standard plan cost-share is $30.
In this scenario, the $30 is applied to TrOOP because it is the greater amount.
Example 2
Your plan cost-share is $45, and the Defined Standard plan cost-share is $32.
In this example, the $45 is applied to TrOOP because it is the greater amount.
In summary, your TrOOP accumulation may differ from their actual out-of-pocket costs.
New Manufacturer Discount Program
Also new for 2025, CMS has introduced a new program that replaces the Coverage Gap Discount Program. This new program offers a 10% discount on brand-name drugs during the Initial Coverage stage and 20% in the Catastrophic stage. Plan sponsors are required to apply these discounts to the pricing used at the point of sale to calculate any member coinsurance.
You become eligible for the new discount program after reaching the Medicare Defined Standard deductible amount.
Note: If you choose to use a discount card, like GoodRx or others, the new discount program will not apply. Purchases made with discount cards are considered off-benefit and do not count toward your accumulator.
You will not necessarily know which brand-name drugs will be cheaper under the new discount program. Applicable drugs under the discount program are Part D drugs approved under a New Drug Application (brands) or the Public Health Service Act (biologics). Unfortunately, like the previous Coverage Gap Discount Program, there isn’t a list of eligible medications.
Similarly, you will not see the discount on their Explanation of Benefits (EOB), or otherwise know you benefited from a manufacturer discount. The discounts are taken into account within claims adjudication/payment systems and calculated automatically at the point of sale, so you will not see any type of line item on the EOB about a manufacturer discount.
Discounts do not apply to the TrOOP calculation. Your costs for prescriptions are based on the cost-sharing amounts under their Part D benefit. This program applies to stand-alone Prescription Drug plans and Medicare Advantage plans with prescription drug coverage.
Medicare Prescription Payment Plan
Starting in 2025, CMS has introduced the Medicare Prescription Payment Plan offering the option to pay $0 at the point-of-sale, and instead, pay for their prescriptions through a monthly payment program during the calendar year. This program applies to stand-alone Prescription Drug plans and Medicare Advantage plans with prescription drug coverage.
This program does not provide you with any savings. You pay the same annual out-of-pocket costs but will have the prescription costs distributed differently. This option may not be right for everyone and may lead to confusion.
In conclusion:
Medicare Prescription Drug coverage is making some pretty big changes in 2025. Ashford Insurance is here to help you understand and make any needed changes.
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