Q. My wife and I have high prescription drugs costs. I hear that there may be changes to the Medicare Drug program that may make them more affordable for us. Is that correct and can you provide any more information?
A. Yes, indeed. As part of the Inflation Reduction Act (“IRA”) passed by Congress and signed by President Biden in August 2022, good news is here for seniors with high cost medications, and even more good news is coming in 2025. In short, in 2024 and 2025, the prescription drug benefits available to enrollees under Medicare Part D will undergo dramatic changes, the thrust of which is to curb the exorbitant cost of medications, thereby making prescription drugs more affordable to seniors and to the disabled on Medicare.
Background: Under Medicare Part D as it existed through 2023, enrollees would typically pay for drugs based upon their accumulated Out of Pocket Costs (“OOP”) during the plan year.
Notably, when “OOP” exceeded $7,400, he or she would thereafter be obliged to pay a 5% co-insurance cost for medications. For those seniors with high drug costs, this arrangement posed a real economic burden. Under the IRA, this is now changing for the better.
Here are some bullet point summaries of the changes:
1) Catastrophic Phase: the 5% Co-Payment Eliminated: For those with very high drug costs which exceed the Catastrophic Phase ($7,400 threshold in 2023 and $8,000 in 2024), the new rule for 2024 eliminates the 5% co-payment entirely for the cost of drugs above that Catastrophic Phase cap. This change, alone, will result in significant savings to enrollees who use expensive drugs, such as drugs for cancer treatment.
2) Insulin Price Cap: the law now provides a $35 cap on a 30 day supply of any insulin that Medicare covers, whether the drug coverage is under a Medicare Part D Plan, or under a Medicare Advantage Plan;
3) Vaccines Without Cost: Vaccines recommended by the Centers for Disease Control continue to be covered without cost to Part D enrollees. Included are vaccines for shingles and RSV, flu, COVID-19, pneumonia, hepatitis A, rabies and tetanus.
4) Drug Prices Inflation Controlled: Drug makers who increase pricing more than the rate of inflation must pay a rebate to Medicare, thus effectively discouraging excessive price increases on drugs subject to this rule. There are currently 64 drugs earmarked for this rebate requirement.
5) Drug Price Negotiation Now Authorized: Under the new drug law, Medicare – for the first time – is now permitted to negotiate with manufacturers over the price of drugs. Currently, 10 drugs have been selected for this process, and CMS will publish in September, 2024, a list of what the maximum prices will be for these drugs.
6) ‘OOP’ Drug Costs Payable In Monthly Installments: Beginning in 2025, Part D enrollees will have the option of paying Out-Of-Pocket (“OOP”) drug costs in monthly payments spread over the calendar year, rather than all at once at the pharmacy. This is an Opt-In program called the “Medicare Prescription Payment Plan”. Program participants will pay zero to their pharmacy for covered drugs. Their Part D plans will then bill the participants monthly for any cost sharing. The Part D plans will be required to notify the pharmacy to provide information to participants when their “OOP” is $600 or more for a single prescription at the point of sale.
7) Extra Help Program Requirements Relaxed: As of 2024, the IRA made it easier to qualify for this Low Income Subsidy Program (aka, LIS or “Extra Help”), by increasing the qualifying income threshold. Now, individuals with annual incomes up to $21,870 per year can qualify.
8) Donut Hole To Be Eliminated: In 2024, you enter the so-called “Donut Hole” when you and your Part D Plan spend a total of $5,030. In the Donut Hole, enrollees pay up to 25% OOP for covered medications, and leave the Donut Hole when they have spent $8,000 in OOP costs for covered medications. The good news: Year 2024 will be the last year for the Donut Hole!.
9)”OOP” Cap of $2,000 in 2025: Perhaps most importantly, as of January 1, 2025, the maximum Out-Of-Pocket payment for drugs will be capped at a flat $2,000 per person, resulting in very significant savings for most seniors and the disabled, especially those with high “OOP” prescription drug costs.
The whole thrust of the changes made by the IRA is to make it significantly easier for Seniors and the disabled on Medicare to purchase necessary medications to maintain their health.