Medicare Part D Plans Will See Significant Changes

The Inflation Reduction Act lowers out-of-pocket prescription expenses, caps insulin copays, and provides free immunizations.
Medicare Part D Plans Will See Significant Changes

The Inflation Reduction Act lowers out-of-pocket prescription expenses, caps insulin copays, and provides free immunizations.

The amount of money that beneficiaries in drug plans will have to pay for their medicines each year will be capped for the first time in Medicare's history, thanks to provisions in the Inflation Reduction Act of 2022. Other modifications to the program's Part D prescription coverage include limiting out-of-pocket costs for insulin and making essential immunizations free.

"Previously, there was no cap on how much a person on Part D could have to pay in a given year," explains Nancy LeaMond, executive vice president and chief advocacy and engagement officer at AARP. "In 2020, 1.3 million enrollees spent more than $2,000."

The increases to Part D out-of-pocket spending, like many other provisions in the new law, will be phased in over the next several years. Here's how the new cost-sharing regulations will work and when the savings will begin.

Out-of-pocket expenses are limited.
The major news for recipients is that starting in 2025, the most they will have to pay out of pocket for prescription medications each year will be $2,000. Here are a few crucial details.

  • This out-of-pocket maximum applies if you get your prescription drugs through a separate Part D plan that people with original Medicare join up for, or if you get your Medicare through a private Medicare Advantage plan. Prescription medicines are typically covered by the majority of these MA plans.
  • The cap's amount may alter over time. If Medicare Part D spending on prescription medications per enrollee rises, the $2,000-a-year cap may climb as well.                                      
  • Medicare members will no longer have any out-of-pocket expenditures after they join what Medicare deems catastrophic coverage in 2024, the year before the out-of-pocket cap takes effect. In 2022, catastrophic coverage requires enrollees to pay 5% of their prescription medication prices, with no cap, once their out-of-pocket costs surpass $7,050.

However, beginning in 2024, the 5% coinsurance requirement will be eliminated, and enrollees will not have to pay anything for their prescription medicines for the remainder of the year.

Another change to the Medicare medication benefit that will take effect in 2025 is the requirement that Part D plans provide consumers with the option of smoothing cost-sharing. This means you can choose to spread out your out-of-pocket expenses over the course of the year. This is intended to safeguard people from being faced with a large drug bill all at once, which may deter them from filling their prescriptions.

Premium increases are restricted.
Beginning in 2024 and continuing until 2029, Part D premiums cannot increase by more than 6% each year, according to the new law. The national average Part D premium in 2022 will be $33.37 per month. These rates vary greatly depending on where you reside and whatever plan you choose.

Insulin charges are being reduced.
Copays for a 30-day supply of any insulin covered by a Medicare medication plan will be restricted at $35 beginning in 2023. It should be noted that Part D plans must adhere to the $35 copay restriction even if an enrollee has not completed their annual deductible.

If insulin becomes a negotiating point with drug companies, the price could be reduced. Given that, while the monthly maximum copay will be $35 from 2023 to 2025, insulin copays will be $35 or 25% of the drug's negotiated price beginning in 2026 (the first year negotiated prices will take effect) (whichever is less).

Many immunizations are free.
Beginning January 1, 2023, Medicare participants will have no out-of-pocket fees for vaccines recommended for adults by the Centers for Disease Control and Prevention's Advisory Committee on Immunization Practices.

Some vaccines, including as flu injections, pneumonia vaccines, hepatitis B inoculations, and coronavirus vaccines, are already completely covered by Medicare Part B, which covers doctor visits, diagnostic testing, and other outpatient services (initial shots as well as boosters).

However, other vaccines, most notably the costly shingles vaccine, are covered through Part D prescription drug plans, and many of these plans now compel users to contribute the cost of such doses. The new law eliminates this cost-sharing arrangement.