When Pam McClure learned she would save nearly $4,000 on her prescription medications next year, she said, “it seemed too good to be true.” Both she and her husband are retired and live on a “very strict” budget in central North Dakota.
By the end of this year, you will have spent almost $6,000 on your medications, including a medication to control your diabetes.
McClure, 70, is one of the approximately 3.2 million people with Medicare prescription drug insurance whose out-of-pocket drug costs will be capped at $2,000 in 2025 due to the U.S. Inflation Reduction Act of 2022. Biden administration, according to an Avalere/AARP study.
“It’s wonderful, oh my God. In fact, we could live,” McClure said. “Maybe I can afford to buy fresh fruit during the winter.”
The IRA, a climate and health care law that President Joe Biden and Vice President Kamala Harris tout on the campaign trail as one of the biggest achievements of their administration, radically redesigned the Medicare drug benefit, called Part D, which serves to around 53 million people aged 65 and over. or with disabilities. The administration estimates that about 18.7 million people will save about $7.4 billion next year alone because of the out-of-pocket limit and less publicized changes.
The annual enrollment period for Medicare beneficiaries to renew or change their drug coverage or choose a Medicare Advantage plan began on October 15 and runs through December 7. Medicare Advantage is the commercial alternative to traditional, government-run Medicare and covers health care and often prescription drugs. drugs. Stand-alone Medicare drug plans, which cover medications typically taken at home, are also administered by private insurance companies.
“We always encourage beneficiaries to really look at plans and choose the best option for them,” Chiquita Brooks-LaSure, director of the Centers for Medicare and Medicaid Services, told KFF Health News. “And this year in particular it’s important to do it because the benefit has changed a lot.”
The improvements to Medicare drug coverage required by the IRA are the most sweeping changes since Congress added the benefit in 2003, but most voters are unaware of them, according to KFF polls. And some beneficiaries may be surprised by one downside: premium increases for some plans.
CMS said Sept. 27 that nationally the average Medicare drug plan premium decreased about $1.63 a month (about 4%) from last year. “People enrolled in a Medicare Part D plan will continue to see stable premiums and have broad options for affordable Part D plans,” CMS said in a statement.
However, an analysis by KFF, a nonprofit health information organization that includes KFF Health News, found that “many insurers are raising premiums” and that large insurers, including UnitedHealthcare and Aetna, also reduced the amount. of plans they offer.
Many Part D insurers’ initial 2025 premium proposals were even higher. To cushion the price shock, the Biden administration created what it calls a demonstration program to pay insurers an additional $15 a month per beneficiary if they agreed to limit premium increases to no more than $35.
“Absent this demonstration, premium increases would certainly have been higher,” wrote Juliette Cubanski, deputy director of KFF’s Medicare Policy Program, in her Oct. 3 analysis.
Almost all Part D insurers accepted the settlement. Republicans have criticized it, questioning CMS’s authority to make additional payments and calling it a political ploy in an election year. CMS officials say the government has taken similar steps in implementing other changes to Medicare, including under President George W. Bush, a Republican.
In California, for example, Wellcare’s popular Value Script plan went from 40 cents a month to $17.40. The Value Script plan in New York went from $3.70 per month to $38.70, a more than tenfold increase, and precisely a $35 increase.
Cubanski identified eight plans in California that raised their premiums by exactly $35 a month. KFF Health News found that premiums increased in at least 70% of drug plans offered in California, Texas and New York and in about half of the plans in Florida and Pennsylvania, the five states with the most Medicare beneficiaries.
Spokespeople for Wellcare and its parent company, Centene Corp., did not respond to requests for comment. In a statement this month, Centene senior vice president of clinical and specialty services Sarah Baiocchi said Wellcare would offer the Value Script plan at no premium in 43 states.
In addition to the $2,000 drug spending limit, the IRA limits Medicare copays for most insulin products to no more than $35 per month and allows Medicare to negotiate prices on some of the most expensive drugs directly with companies. pharmaceuticals.
It will also eliminate one of the most frustrating features of the drug benefit, a gap known as the “donut hole,” which stops coverage just as people face rising drug costs, forcing them to pay the plan’s full price for prescription drugs. their pockets until they reach a spending threshold that changes from year to year.
The law also expands eligibility for “extra help” subsidies for about 17 million low-income people in Medicare drug plans and increases the amount of the subsidy. Pharmaceutical companies will have to chip in to help pay for it.
Starting January 1, the redesigned drug benefit will work more like other private insurance policies. Coverage begins after patients pay a deductible, which will not exceed $590 next year. Some plans offer a lower or no deductible, or exclude certain medications, usually inexpensive generics, from the deductible.
After beneficiaries spend $2,000 on deductibles and copayments, the rest of their Part D drugs are free.
This is because the IRA increases the portion of the bill that insurers and pharmaceutical companies pay. The law also attempts to curb future drug price increases by limiting increases in the consumer price inflation rate, which was 3.4% in 2023. If prices rise faster than inflation, drug makers They have to pay the difference to Medicare.
“Before the redesign, Part D incentivized drug price increases,” said Gina Upchurch, a pharmacist and executive director of Senior PharmAssist, a nonprofit in Durham, North Carolina, that counsels Medicare beneficiaries. . “The way it’s designed now puts more financial obligations on plans and manufacturers, putting pressure on them to help control prices.”
Another provision of the law allows beneficiaries to pay for medications in installments, rather than having to pay a large bill in a short period of time. Insurers are supposed to do the math and send policyholders a monthly bill, which will be adjusted if medications are added or removed.
Along with the big changes brought about by the IRA, Medicare beneficiaries should prepare for the inevitable surprises that will occur when insurers review their plans for a new year. In addition to raising premiums, insurers can eliminate covered drugs and remove pharmacies, doctors or other services from provider networks that beneficiaries must use.
Losing the opportunity to change plans means your coverage will automatically renew, even if it costs more or no longer covers needed medications or preferred pharmacies. Most beneficiaries are locked into Medicare drug and Advantage plans for the year unless CMS grants them a “special enrollment period.”
“We have a system that is run through private health plans,” CMS Chief Brooks-LaSure said. But he noted that beneficiaries “have the ability to change their plans.”
But many don’t take the time to compare dozens of plans that may cover different drugs at different prices at different pharmacies, even when the effort could save them money. In 2021, only 18% of Medicare Advantage drug plan enrollees and 31% of standalone drug plan members compared their plan’s benefits and costs to competitors, KFF researchers found.
For free, impartial help selecting drug coverage, contact the State Health Insurance Assistance Program at shiphelp.org or 1-877-839-2675.
