The Inflation Reduction Act (IRA) of 2022 is an expansive bill that includes several provisions to lower prescription drug costs for Medicare beneficiaries over several years.
CMS has already implemented some of the changes, beginning in 2023 when the cost of insulin was capped at $35 per month. In 2024, the IRA lowered the income threshold for Extra Help, making more people eligible for full benefits. It also eliminated the 5% coinsurance for those reaching the catastrophic coverage phase of the Part D coverage gap and limited the Part D premium increase to no more than 6% between 2024 and 2029. This provision will prevent insurance carriers from raising premiums to compensate for higher costs.
Additional IRA provisions slated to begin January 1, 2025, will have a significant impact on the Medicare marketplace and enrollees.
Changes for 2025
Using the timeline defined by the IRA, CMS will implement the following Part D improvements in 2025:
- Eliminate the Part D coverage gap and put a $2,000 out-of-pocket annual spending cap on Part D drugs. This applies to all Part D plans, both standalone and part of a Medicare Advantage plan. The cap does not apply to Part B drugs.
- Implement the Medicare Prescription Payment Plan. This voluntary, opt-in program (also known as cost smoothing) will allow Medicare beneficiaries to spread out their Part D out-of-pocket costs over the year in monthly installments, which will protect them from incurring high costs in any given month.
- Require rebates from drug companies if their prices rise faster than inflation.
What These Changes May Mean for Your Clients
This initially sounds like good news for many Medicare beneficiaries, especially those taking expensive drugs who don’t qualify for Extra Help. However, these changes will reduce Medicare’s financial liability and shift more responsibility for costs to the drug manufacturers and the Part D insurance carriers. These changes mean drug manufacturers and insurers will need to find ways to offset these increased costs to remain profitable.
Some of the anticipated repercussions include:
- Higher drug costs – Drug manufacturers may respond by charging more for some medications.
- Higher premiums – Insurance carriers may respond by raising premiums.
- Changes to drug formularies – Insurers may implement additional cost controls, including more restrictions on which drugs they cover, additional step edits, quantity limits, and prior authorizations.
- More prior authorizations for medical services – Cost controls may spill over to medical services, resulting in more procedures and tests requiring prior authorization.
- Fewer plans – Some health insurers may find it difficult to offer competitively priced coverage, especially for standalone part D plans, meaning they may stop offering plans in some areas.
- Fewer benefits – Medicare Advantage plans may consider trimming some of the ancillary benefits so many of their members enjoy.
- Reduced payments to providers – Some Medicare Advantage plans may consider reducing payments to providers, which would result in less provider participation and smaller networks.
- Broker and agent compensation – Increased financial pressure may lead to potential changes in commissions.
Why ANOCs Are So Important This Year
Many of your clients may not be in the habit of thoroughly reviewing their ANOCs. They may be happy with their plans and not be anticipating any need to make a change for 2025. You play an important role in educating your clients on what’s transpiring in the marketplace and helping them prepare.
Reach out to your clients early to let them know when to expect the ANOC from their carrier and to review it carefully, especially any changes related to their Part D coverage and the drug formulary. Remind them that AEP is coming. Encourage them to reach out to you after October 1 to set up an appointment to review their current coverage and the changes for 2025. Let them know that you can help them find a new plan, if necessary.
You should also prepare by familiarizing yourself with carrier changes for 2025 and taking advantage of First Looks when they become available. This will put you in the best position to assist your clients during this time of change.
The team at Western Asset Protection is here to support you as you prepare for AEP. Contact us today if you have any questions.