The 2025 Medicare Part D redesign, driven by the Inflation Reduction Act (IRA), introduces significant changes that will impact how you assist seniors in choosing their Part D plans.
Some big changes are coming on January 1, 2025, including no more donut hole and a $2,000 annual out-of-pocket threshold. Let's get into some details so you can best prepare for the upcoming AEP.
What's the Inflation Reduction Act?
All of the Part D changes that have happened and continue to roll out are from the Inflation Reduction Act (IRA), which was signed into law in August 2022.
These changes are being slowly rolled out each year, starting on January 1, 2023 and going all the way through 2029 and beyond.
According to the press release from The White House, Americans pay 2-3 times more for their prescriptions than people in other wealthy countries. The IRA will help improve access to medication and lower drug prices in Medicare.
You can also download the "Inflation Reduction Act: CMS Implementation Timeline" sheet for an overview of all the coming changes.
Key Part D Changes in 2025
The out-of-pocket payment structure for Part D is changing for 2025.
- Annual Deductible: Beneficiaries will pay 100% of their prescription costs until they reach a deductible of $590.
- Initial Coverage: After meeting the deductible, they will pay 25% of their drug costs until their out-of-pocket spending hits $2,000.
- Catastrophic Coverage: Once the $2,000 threshold is reached, beneficiaries will pay nothing for their covered drugs for the remainder of the year.
The most a beneficiary will spend out-of-pocket annually is capped at $2,000, ensuring more predictable and manageable drug costs.
In addition, the Coverage Gap, or “donut hole,” is being removed. This simplifies the coverage phases and reduces out-of-pocket expenses for seniors.
Finally, we have the introduction of the Manufacturer Discount Program. This new program replaces the Coverage Gap Discount Program and will provide discounts on certain medications even before the deductible is met.
Why These Changes Are Happening
The IRA aims to reduce healthcare costs and enhance accessibility for seniors.
Lowering the maximum out-of-pocket spending helps protect seniors from high prescription costs. Eliminating the donut hole and introducing clear coverage phases makes it easier for beneficiaries to understand their benefits.
Lastly, the Manufacturer Discount Program ensures that essential drugs, like insulins and vaccines, remain affordable.
Addressing Client Concerns
Any time there are changes to plans, your clients will have questions about their current coverage.
Here’s how you can address them:
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“How will these changes affect my current plan?”
- Explain that the new structure aims to make costs more predictable and manageable. The elimination of the coverage gap means fewer surprises with out-of-pocket expenses.
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“Will I really save money with these changes?”
- Highlight the $2,000 out-of-pocket cap and the new discount program, emphasizing how these measures are designed to reduce overall spending on prescriptions.
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“How will this impact my medication costs specifically?”
- Provide a personalized assessment based on their current medications, showing potential savings and the benefits of the new coverage phases.
Changes Coming In 2026
Now that you know what's coming for 2025, here's a quick look at the Part D changes that will go into effect in 2026:
- Maximum fair prices for the first 10 Medicare Part D drugs selected for negotiation will go into effect. This is the first year that people with Medicare will start to benefit from Medicare negotiating prices with drug companies.
- By February 1, 2026, CMS will announce 15 more Medicare Part B or Part D drugs for price negotiation.
- By November 30, CMS will publish the maximum fair prices for the 15 Part B or Part D drugs selected for negotiation earlier in the year. Maximum fair prices for these drugs will go into effect in 2028.
- Beginning in 2026, government reinsurance in the catastrophic phase of Part D will be 40% for Medicare Part D drugs selected for negotiation in their applicability period.
Conclusion
Embrace these changes as an opportunity to deepen your relationships with clients, helping them navigate their healthcare needs with confidence and ease.
Stay proactive, stay informed, and continue to be the reliable resource your clients need during this transition.
Related: How to Sell Medicare Part D
