FAQs & quicklinks

In 2022, the Inflation Reduction Act (IRA) was signed into law making significant changes to Part D drug coverage which affects both Medicare Advantage and standalone Prescription Drug Plans. 

These changes will take effect in three major ways:

• Covered out-of-pocket drug costs will now be capped at $2000/year  (This amount will be adjusted yearly to coincide with inflation)

• You will no longer pay set copays at the pharmacy, but will instead be charged 25% coinsurance (This now includes all tiers of drugs, including generics)

• The Donut Hole (Coverage Gap) will be eliminated

These permanent changes will be effective January 1, 2025

Your Part D drug costs for covered prescriptions will now be billed in three different ways, called phases. 

Here's how they will work:

Deductible Phase - You pay 100%

• In this first phase, you are required to pay 100% of your drug costs, up to the 2025 maximum of $590 (Some plans will likely have a deductible of $0)

Initial Coverage Phase - You pay 25%, Your insurer pays 75%

• *NEW - Once you have reached your deductible, you will pay 25% coinsurance for all drugs covered by your insurer until you reach the $2000 max out-of-pocket

• *NEW - You now have the option to set up a payment plan with your insurer if the 25% coinsurance is too costly to pay up front (More about that below)

Catastrophic Phase - Your insurer pays 100%

• *NEW - Once you reach your $2000 out-of-pocket max, carriers and manufacturers pick up 100% of your drug costs for the rest of the plan year

It depends. 

Each insurance company has a formulary, which is a list of all the prescriptions they cover. If you take a prescription drug that is not on your insurance's formulary, you will be charged full price at the pharmacy.

It's also important to note that insurance companies update their lists of covered drugs annually, and sometimes a drug that was covered in the past is no longer and vice versa. We especially expect this to be the case in 2025.

There is good news though!  See the "How else can I save on my prescriptions?" FAQ below to learn about the overlooked ways you can save on your prescription drug costs.

Possibly. You may end up facing these charges in addition to your $2000 out-of-pocket max:

• Non-covered prescriptions will be charged at full price

• A pharmacy "dispensing fee" for filling your prescription

• Certain drugs administered by doctors or their care team (such as chemotherapy or biologics) will be covered under Part B Medicare and will not count towards your $2000 cap

Sure. Because you will be required to pay 25% of your drug's full retail price instead of a set dollar copay, it's possible that your pharmacy costs may be higher even though the overall out-of-pocket cap is much lower than in previous years.

To solve this, you will be able to sign up for a new program called the Medicare Prescription Payment Plan (MPPP). 

Here's what you need to know:

• The MPPP allows you to pay your annual prescription costs over time instead of being charged a larger sum at the pharmacy all at once(More about that in the next FAQ)

• You will need to voluntarily opt-in to the MPPP through your insurance carrier - there is no auto-enroll option

• You may opt in or  out at any time of the year and for any reason

• Your annual drug deductible is allowed to be included in the MPPP

• There are no income restrictions and as long as you meet some basic qualifications, anyone who is covered under Medicare can apply

• You are given a grace period of at least two months to pay, and carriers are not allowed to terminate the policy even if payment is not received within that timeframe

• If you previously set up an MPPP with a drug company but decide to switch plans, you are still responsible for making the original payments; however, you are permitted to initiate a new MPPP with the new drug company without penalty or delay

• The MPPP is only available for your covered Part D drug costs and is separate from your Part B and D (if applicable) monthly premiums, uncovered prescription costs and your Medical deductible, copays & coinsurance

MPPP's are meant to be easily accessible for seniors, but there are a few qualifications you must meet:

• Your monthly drug costs for covered meds must be $600 per month or more

• You must agree to make monthly payments for the remainder of the calendar year

•  You cannot be on LIS or the Medicare Savings Program

• MPPP's are only for covered drugs that count against your $2000 out-of-pocket max. Uncovered drugs are excluded

As an example, let's say your plan has $0 deductible, but the 25% co-insurance requirement now puts your covered monthly drug costs at $700. 

In this scenario, if you put in your request for an MPPP in January, your total drug cost would be capped at $2000 for the year by March, and your payment would be $166.66/month through December. 

From what we understand thus far, your monthly MPPP amount depends on when you initiate it, so your monthly payment *could* be more if you begin it later in the year. The above is just meant to be a simple illustration of how it might work for you and is subject to change.

The good news is that there are many overlooked ways to get your prescription drug costs down. 

• Sign up for a free GoodRX discount card

• Get your prescriptions mail ordered with your current insurance company (90 day supplies are often less expensive)

• Apply for drug company Assistance Programs/Manufacturer coupons (You'll need your doctor's help to get this process going)

• Use Specialty Pharmacies that work directly with doctors (Consult your doctor about the possibility of this option. YMMV)

• Ask if your doctor has samples of your prescription

• Talk to your doctor about switching to an equivalent or generic that is on your insurance's formulary, if available

• Ask your doctor to request a formulary exception with your plan (This is when the insurer agrees to cover a drug for medically necessary reasons when they normally wouldn't.)

• *NEW* - Use Online Pharmacies such as Mark Cuban's CostPlusDrugs.com or Amazon Pharmacy for savings on generic drugs(Prime Members pay $5/month with free shipping)

• Consider switching to a new standalone drug plan or Medicare Advantage plan that covers your prescription or has it in a lower drug tier

*This is not to be interpreted as medical advice. Please consult your doctor regarding any healthcare/prescription changes or needs. We are not affiliated with any company mentioned above.

These new changes to Part D drug costs are some of the most sweeping to happen to Medicare since 2006 when Medicare Advantage plans were first introduced. 

Because of that, it's more important than ever to communicate just how crucial it is to do a policy review heading into 2025. 

As of this writing (June 2024), these are the final key takeaways we feel you need to be aware of:

• While these are the initial rules and guidelines put out by the government, they are subject to being revised at any time

• Although the out-of-pocket max is $2000, it cannot be assumed that your drug costs will automatically go down or  that your drugs will remain covered under your current plan

• This legislation has shifted a significant financial responsibility onto insurance companies and it's unclear as of yet how they intend to compensate for that

From what we have been advised, it's possible carriers may:

• Move lower tier drugs(aka less expensive) to a higher tier, thus making them costlier at the pharmacy

• Remove certain higher tier drugs from being covered entirely

• Increase the monthly premiums of standalone Part D drug plans by at least 10% - 16% (estimated)

• Increase the out-of-pocket costs for the medical portion of your plan (Medicare Advantage plans only)

• Decrease certain benefits to Medicare Advantage plans (TBD)

While we won't understand the full scope of these changes until October, we do know that they are coming and that they will affect everyone a little bit differently.

As far as we can tell right now, these new rules will give huge financial relief to some, and may end up costing others a bit more at the pharmacy despite the new $2000 max out-of-pocket rule.

So, before the 2025 enrollment season begins, here's what we need to you to do to prepare:

• Don't auto-enroll! Instead, schedule a time to speak with Aaron beginning October 1st (The sooner, the better!)

• Watch the video above explaining these changes

• Complete a new Scope of Appointment Form so we can hit the ground running when we meet this fall

• Fill out our *NEW* Report a Life Event Form so we have your most accurate information on file going into this year's enrollment season

• Remember that you're not alone! We'll navigate these changes together and ensure you stay well informed and protected