Inflation Reduction Act and impacts to YOUR Medicare in 2025

By Nina Besant, Burley & Besant Medicare Benefits ~

In August 2022 the Inflation Reduction Act was signed into law. This is a 10-year tiered implementation act where each calendar year certain changes will occur. It has been the most significant healthcare legislation, since the Affordable Care Act and most Medicare beneficiaries are unaware of the changes coming.

For 2023 we experienced insulin cost sharing capped at $35/month for Part B & Part D. It also made adult vaccines, available at no cost for people with Medicare prescription drug coverage starting January 1, 2023 and beyond. Lastly, it also required drug companies that raise their drug prices faster than the rate of inflation to pay Medicare a rebate.

In 2024 the Inflation Reduction Act expanded the low-income subsidy program (LIS or “Extra Help”) under Medicare Part D to 150% of the federal poverty level. This provides more assistance in affording Medicare prescription drug coverage premiums and out-of-pocket drug costs to those in need. Finally, the 5% catastrophic coverage phase was eliminated in 2024. That extra 5% the Medicare beneficiary would have paid is now being absorbed by the health plan.

In 2025 there will be immense financial changes transferred to the beneficiary. Starting in 2025 the Inflation Reduction Act will take the Part D Out-of-pocket cap which is currently set at $8,000 and reduce it to $2,000. This sounds like great news, which for about 4% of the Medicare population it will be, but for most the industry is anticipating seeing Insurance Carriers raise premiums, co-pays and co-insurance to cover this reduction from the $8,000 cap in 2024 to $2,000 in 2025.  

Right now, stand-alone Part D premiums are, on average, about $30/month nationally. Medicare beneficiaries will see those rise to double or possibly triple in 2025. We will also see carriers completely abandon the Part D market and leave their beneficiary without coverage. If a beneficiary does not reenroll in a plan they could risk a penalty for not having credible coverage. 

This does not only affect the stand-alone Part D plans, but it will also affect beneficiaries on a Medicare Advantage plan that have the Part D built into the plan. Usually, the Medicare Advantage plan absorbs the Part D deductible, which for 2024 is $545. In 2025 it is estimated to be $590. It is possible that the Part D deductible will be shifted back to the beneficiary in 2025.

We are seeing carriers move away from a set dollar co-pay for a medication to a percentage co-pay, leaving beneficiaries responsible for a greater dollar amount depending on the cost of their medications.  We also anticipate a potential reduction in drug formularies. A drug formulary is the tiered list of medications a drug plan will cover for a beneficiary. Each plan decides which drugs on its formulary go into which tiers. 

The Medicare Annual Enrollment Period runs from Oct 15th to Dec 7th. This is a very small window where Medicare Beneficiaries are bombarded with information from carriers, TV commercials and advertising. It is imperative that this year every single Medicare Beneficiary review their Medicare plan with their trusted broker. That way you can ensure that your medications are on the plan’s formulary, that you can continue to afford the copay or coinsurance for that medication and ultimately that you can afford the plan premium. 

If you are not currently working with a trusted Medicare broker and would like to receive ongoing communications so you can stay informed about this legislation please reach out to Nina directly at 303-717-5393 or email: ninab@sagecare.com

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