Inflation Reduction Act and Medicare 2025: Significant Changes Explained

Impact of the Inflation Reduction Act

In preparation for the Medicare Season for 2025, licensed agents like myself begin preparations for the Medicare 2025 season. The upcoming season will see significant changes, especially for Medicare Part D (Prescription Plans) and Medicare Advantage (Part C) policyholders, due to the Inflation Reduction Act. See CMS Newsroom article

Key Changes for 2025

Medicare Prescription Payment Plan:

Insurance carriers offering Part D and Medicare Advantage plans with prescription drug coverage (MAPD Part C) will allow enrollees to pay out-of-pocket prescription drug costs in capped monthly installments, instead of all-at-once at the pharmacy.

This will benefit enrollees with expensive drugs (Tier 3-5), who must first meet an annual deductible, set at $590 for 2025.

Part D Redesign Program:

In 2025, the annual out-of-pocket cost for prescription drug plans (catastrophic level) will be capped at $2,000 the new catastrophic level (down from $8,000 in 2024). Once the catastrophic level at $2,000 is reached, there are no more drug costs for Medicare policyholders on formulary drugs.

The new structure will include only an annual deductible, initial coverage, and catastrophic coverage. Consequently, we have eliminated the coverage gap (donut hole) and replaced it with a new manufacturer discount program.

Significant changes include shifting liabilities between enrollees, Part D sponsors, manufacturers, and Medicare. As a result, this redistribution aims to balance costs more effectively among all parties involved. In 2025, once enrollees reach the catastrophic coverage gap, Medicare will cover 40% while insurance carriers will cover 60% after reaching the out-of-pocket maximum. In 2024, Medicare covered 80% and insurance carriers covered 20% once enrollees reached the catastrophic gap.

Future Drug Cost Negotiations:

From 2026-2028, Medicare will negotiate prices for certain high-cost drugs. Manufacturers will cover 20% of the cost, while Medicare will reduce its share to 20% once the out-of-pocket maximum is reached.

Effects of the Changes

Positive Impact: Medicare policyholders with high drug consumption will see lower drug costs.

Unintended Consequences:

Increased premiums for Medicare Part D drug plans.

Potential reduction in additional benefits for Medicare Advantage plans.

Higher premiums for low-cost prescription plans for those using few or no generic medications.

Shift in drug formularies and higher co-insurances

Medicare Insulin and Vaccine Benefits

Starting in 2024, Medicare policyholders will pay no more than $35 per month for Medicare-covered insulin products. Additionally, Medicare-recommended vaccines will be available at no cost.

With all these upcoming changes, it is important that you study your Annual Notice of Change (ANOC). The ANOC details any changes in plan benefits, coverage, or costs that will take effect in the coming year. This document is distributed to Medicare beneficiaries by September 30 each year, giving them time to review and understand the changes before the Annual Enrollment Period begins on October 15.

Remember, due to Medicare regulations, agents cannot market before October 1, 2025, and share plan-specific details for 2025 Medicare plans. If you want information about Medicare, please contact info@solidhealthinsurance.com or fill out this survey.

We at Solid Health insurance Services are excited assisting Medicare policyholders navigating the upcoming 2025 Medicare season. Therefore, please contact us with any questions you may have at barb@solidhealthinsruance.com or call (310) 331-0804 our designated recorded Medicare line.

Disclaimer: We do not offer every plan available in your area. Currently we represent 9 organization for Medicare Advantage which offer 68 products and 7 organizations which offer 19 products in your area. Please contact Medicare.gov , 1800-Medicare, or your local State Health Insurance Program to get information on all of your options.

 Not connected with or endorsed by the U.S. government or the federal Medicare program