The Inflation Reduction Act (IRA) of 2022 has made many positive changes to the Medicare program. For Medicare’s Part D Prescription Drug benefit, the IRA includes significant prescription cost-savings that took place in 2023, 2024 and two more coming in 2025 – the $2,000 cap on out-of-pocket drug costs and the Medicare Prescription Payment Program. Below is a quick summary of the positive changes from the last two years, followed by a review of these upcoming 2025 changes.
Cost-saving reforms from 2023 & 2024
2023 brought prescription drug savings due to the IRA, including:
- Limiting insulin copayments to $35/month per prescription for covered insulin products in Medicare Part D plans and insulin received through durable medical equipment through Medicare Part B (such as insulin pumps) with no deductible.
- Eliminating cost-sharing for adult vaccines covered under Part D (e.g. shingles), even if the deductible hasn’t been met.
- Requiring drug companies to pay rebates if prices rise faster than inflation.
2024’s cost-saving changes included:
- Eliminating any coinsurance or co-payments during the catastrophic phase of the prescription drug benefit as of January 1.
- Limiting Part D plan premium increases to 6% over what it was the previous year. This protection continues through 2029. The law also provides for a mechanism to stabilize plan premiums in 2030 and subsequent years. This is a “general National estimate” as in California, most plans increased their premium by more than 6% for 2025.
- Expanding the full Low-Income Subsidy (LIS) also known as the Extra Help program to those with incomes up to 150% of the federal poverty level. This has offered expanded financial help to an additional 400,000 beneficiaries with prescription drug cost-sharing and premiums. It also simplified the Extra Help program and streamlined eligibility, reducing enrollment barriers for thousands more people who are eligible but not enrolled.
Cost-saving Reforms for 2025
Medicare Part D $2,000 Out-of-pocket cap – YES!
Beginning January 1, 2025, people with Part D drug plans through Original Medicare and Medicare Advantage plans with drug coverage won’t pay more than $2,000 over the calendar year in out-of-pocket costs for their prescription medications. This is great news, and will help all beneficiaries enrolled in Part D plans by having a limit on their costs, and will particularly those with high drug costs who don’t qualify for Extra Help.
Note that after 2025, the Part D cap will increase each year.
What’s covered
All prescriptions covered by one’s Part D plan are included in this $2,000 cap, including all deductibles, copayments and coinsurance for covered drugs.
what’s not covered
This cap doesn’t apply to premiums or drugs not covered by the plan, including drugs covered under Medicare Part B. Medicare Part B covers drugs that are administered by a doctor, nurse, or other healthcare provider in an outpatient setting such as a doctor’s office.
How to keep track of your costs
You don’t have to keep track of your costs, as your plan will do that for you. It is also automatic, so no one needs to “sign up” for this benefit.
Medicare Prescription Payment Plan – Helpful for people with high drug costs
The Medicare Prescription Payment Plan is a voluntary Medicare Part D payment option that starts January 1, 2025. It allows beneficiaries spread out their drug costs over the calendar year, but does not reduce them. People can opt in to the program through both Original Medicare and Medicare Advantage Part D drug plans.
There are no income or cost requirements to participating in the Medicare Prescription Payment Plan. If you think you may benefit, regardless of your out-of-pocket costs, you can opt in by contacting your plan. If you know you’d like to participate in 2025, contact your plan before January 1 so you can spread out your drug costs over the full calendar year.
How does the plan work?
When you get a prescription for a Part D covered drug, your plan will contact your pharmacy (including mail-order and specialty pharmacies) to let them know that you are participating in this program. You won’t pay the pharmacy for your prescription.
Instead, your plan will send you a monthly bill which spreads out your drug costs over the entire calendar year. The bill will state how much you owe and when payment is due. This bill is separate from your monthly premium bill.
What if I miss a payment?
If you miss a payment, your plan will send you a reminder. If you miss two months in a row, your plan will disenroll you from the Medicare Prescription Payment Plan and send you a letter. You will still be enrolled in your Part D plan, and will owe whatever amount hasn’t been paid.
If you want to re-enroll, you can do so by contacting your plan after you pay any balance due.
Can I leave the plan?
Yes, you can leave the plan anytime by contacting your health/prescription plan. You will need to pay any remaining balance, which you can do monthly or all at once. After leaving the payment plan, you’ll go back to paying for your prescriptions at your pharmacy.
Note that if you leave or change your Medicare Part D plan, your participation in the Medicare Prescription Payment Plan will end and you will need to contact your new plan to rejoin.
To get more help with the Medicare Prescription Payment Plan, you can:
- See Medicare’s website section on the Medicare Prescription Payment Plan. It has more information, plan details, and a video about how it works.
- Visit your health/prescription plan’s website or call your plan; their phone number is on the back of your membership card.
- Visit Medicare.gov or call 1-800-MEDICARE (1-800-633-4227). TTY users: 1-877-486-2048.
- Contact your local Health Insurance Counseling and Advocacy Program (HICAP). HICAP provides free, individual and unbiased assistance with Medicare and other health insurance related issues.
More Information on Medicare Part D Reforms
You can get more information about the Part D reforms on Medicare.gov and in your “Medicare & You” handbook. Also see the PAN Foundation’s website section “Everything you need to know about Medicare reforms.” And remember to contact your local HICAP for free all-things-Medicare counseling at 1-800-434-0222.
