What should health insurance agents know about the Medicare Part D redesign?

The Inflation Reduction Act of 2022 spurred significant changes to drug costs – at least for Medicare beneficiaries (sorry, employer groups and Marketplace consumers). In recent years, we’ve seen $35 caps on monthly insulin fills, inflation-based rebates for both Part B and Part D drugs, and consumers have seen the effective elimination of their responsibilities during the catastrophic coverage phase.

But, plan year 2025 promises more changes to Part D benefits. You’ll need to educate your clients about what comes next. Fortunately, your friendly neighborhood field marketing organization is on the case.

The Medicare Prescription Payment Plan launches in 2025

For the first time, beneficiaries can spread their out-of-pocket prescription costs over capped monthly installments, rather than paying everything all at once. Say, for example, you have a client taking a higher-than-usual dose of fluticasone/salmeterol to help control asthma symptoms. The list price for a 60-dose diskus of 250mcg/50mcg is right around $444. If your client’s Part D plan has the standard deductible (more on that in a moment), they’ll pay the pharmacy full price the first time they fill it in January.

But, if your client enrolls in the program by contacting their Part D carrier, they’ll owe nothing at the counter. The plan will pay the pharmacy, and your client will pay the plan in installments throughout the plan year.

We should note that the plan doesn’t change anything about Part D benefits. Your clients will still move through the coverage stages. The same things will still count toward their deductible and out-of-pocket threshold. The only difference is how and when your clients will pay their cost-sharing responsibilities.

The redesigned standard Part D benefit has only three coverage phases

The redesigned benefit does much to simplify Medicare’s coverage phases and to limit out-of-pocket costs. No longer will there be confusion about coverage gaps and donut holes. Instead, there are only three coverage stages – and for the consumer, they’ll feel a lot like what they experience in ACA-compliant drug coverage.

Annual deductible phase: For plans that use the standard design, your clients will pay 100% of their covered drug costs until they meet the deductible for that contract year. In 2025, that will be $590.

Initial coverage phase: Once the deductible is satisfied, beneficiaries will pay 25% coinsurance for covered Part D drugs. The plan will pick up 65% of the cost of drugs eligible for a new discount program; the manufacturer would pay the remaining 10% for these drugs. For ineligible drugs, the plan would pay the full 75%. The consumer remains in this phase until they reach the annual out-of-pocket threshold. For 2025, that will be $2000.

Catastrophic phase: Your clients will have no out-of-pocket responsibility at this point. Instead, for eligible drugs, the plan will pick up 60% of the cost; the manufacturer and government will evenly split the remaining 40%. The plan will still pay 60% for ineligible drugs, while the government pays the balance.

Some drugs are exempt from deductibles, TrOOP gets a little messy

The Part D redesign also changes the standard benefit to exempt certain insulins and vaccines from the deductible. In practice, that means cost-sharing for these drugs will function a bit differently than you might expect.

In 2025, if a beneficiary has not satisfied their plan deductible, but has paid enough in TrOOP-eligible costs (hello, $35 insulin fills) to satisfy the standard deductible, they will move into the initial coverage phase.

If the beneficiary uses drugs not subject to deductible or satisfies their plan deductible, but hasn’t paid sufficient TrOOP costs to satisfy the standard deductible, the Part D plan is required to cover what a manufacturer would have owed had the drug been eligible for manufacturer discounts. Then, once the standard deductible is satisfied, the manufacturer and plan will split drug costs as outlined above.

So, what exactly do agents and beneficiaries need to know?

Medicare beneficiaries will have significantly lower out-of-pocket expenses for their prescription drugs in 2025 – a $2,000 cap. And, they’ll have the option to spread that cost out over the year with the Medicare Prescription Payment program.

But, these changes do put more financial liability on Part D plans. We’ll likely see premiums rise to help offset those costs. Where permitted, we may see drugs drop off formularies. And, it’s entirely possible we’ll see a rise in utilization management via step therapy, prior authorizations, and moving drugs to higher formulary tiers.

In short, clients will be paying less for drugs overall, but it may be harder to get them.