Medicare Prescription Drug Plan (Part D) FAQs

The Inflation Reduction Act was signed into law on September 16, 2022 and contains changes that affect Medicare-eligibles who are enrolled in MAPD (Medicare Advantage Prescription Drug Plans) or separate Medicare drug coverage (Part D):

This article from the Kaiser Family Foundation contains an excellent overall summary of the Act and how Medicare beneficiaries are affected.

These three provisions became effective January 1, 2023 and affect all beneficiaries who are enrolled in MAPD or Medicare drug coverage (Part D).

1. Limits cost sharing for insulin to $35 per month for people with Medicare, including covered insulin products in Medicare Part D plans and for insulin furnished through durable medical equipment suppliers (e.g., insulin pumps) under Medicare Part B. Note: All Part D plans are required to implement the $35 copay for covered insulin drugs. If beneficiaries are required to pay more for their covered insulins than the $35 copay, there are provisions in the law that permit beneficiaries to submit bills to their carriers for reimbursement. NOTE: the provisions on insulin furnished through durable equipment suppliers in Medicare Part B (e.g., insulin pumps) became effective July 1, 2023.). Also, please note that this $35 cost sharing provision affects ONLY insulins that are included in the plan’s formulary.
   
   
2. Eliminated cost sharing for most adult vaccines covered under Medicare Part D and improved access to adult vaccines under Medicaid and CHIP. Each Part D plan comes with a list of drugs and vaccines it covers. The member’s cost share on all Part D Vaccines on the Advisory Committee on Immunization Practices (ACIP) list is $0 (even if the drug plan has a deductible). The law specifically requires ALL Part D plan benefits to include the shingles vaccine (Shingrix) at zero copay.
   
   (NOTE: For more information regarding the Center of Disease Control and Prevention’s ACIP vaccination recommendations, please go here.)
   
   
3. Requires drug manufacturers to pay rebates to Medicare if they increase prices faster than inflation for drugs used by Medicare beneficiaries. From 2019 to 2020, half of all drugs covered by Medicare had price increases above the rate of inflation over that period (which was 1%, prior to the recent surge in the annual inflation rate), and among those drugs with price increases above the rate of inflation, one-third had price increases of 7.5% or more, the annual inflation rate in early 2022. The inflation rebate provision was implemented in 2023, using 2021 as the base year for determining price changes relative to inflation.
   
   

The following changes to what is called the “standard” Part D prescription drug model have been made for 2024.

The standard design of the Medicare Part D benefit has four distinct phases, where the share of drug costs paid by Part D enrollees, Part D plan carriers, drug manufacturers, and Medicare varies. [The Part D enrollee shares indicated below reflect costs by enrollees who are not receiving low-income subsidies (also known as “extra help.”] Note: All Part D plans must cover at least the Part D standard benefit or meet the requirements for “alternative benefits.” Benefit structures that are not standard but instead are actuarially equivalent are known as “alternative” coverage.

1. The first stage is called the deductible phase. The “standard” Part D deductible has been increased from $505 in 2023 to $545 in 2024. Note that not all Part D plans have deductibles, some have lower deductibles, and some have deductibles only for certain tier levels and no deductible for generic tiers or the lowest-tier generic drugs.
2. Once the deductible (if any) is met, the enrollee enters the initial coverage phase. Carriers are permitted to charge 25% for medications under the standard model, but in 2024 most carriers charge copays for lower-priced medications and coinsurance (to a maximum of 50%) for higher- priced medications.
3. The coverage gap (formerly also referred to as the “donut hole”) phase starts once the enrollee’s total cost of medications reaches $5,030 in 2024 (up from $4,660 in 2023). During this phase, the member’s cost for medications changes to 25% coinsurance. Note: some carriers provide what is called gap coverage, which means the cost for many generic drugs will remain at the same level as they were before the initial coverage limit (i.e., the coverage gap) is reached. Also, carriers are permitted to start the coverage gap at an amount greater than $5,030.
4. The catastrophic phase starts once the “out-of-pocket” threshold reaches $8,000 (increased from $7,400 in 2023). If a person reached the out-of-pocket threshold in 2023, he or she would have paid the greater of 5% or $4.15 for generic drugs; or the greater of 5% or $10.35 for brand name drugs. Once the out-of-pocket threshold is reached in 2024 there will be NO cost for any covered medications.

Note that entry into the coverage gap phase is based on the total cost of the enrollee’s medications in the deductible and initial coverage level phases, whereas a different calculation [called “true out-of-pocket” costs (TrOOP)] is used for calculation of the “out-of-pocket” threshold. Generally, TrOOP includes enrollee (i.e., NOT the total) payments for Part D prescription drugs, including the annual deductible, cost-sharing above the deductible and up to the initial coverage limit, and above the initial coverage limit up to the annual out-of-pocket threshold. The following items are also included in TrOOP:

1. Drug manufacturers’ discounts for brand name drugs (70%) which are paid during the coverage gap count toward TrOOP.
   
2. Generally, for drug costs to count toward TrOOP, drugs must be on the plan’s formulary and be purchased at the Part D plan’s participating network pharmacy.
   
3. Amounts paid or borne by the AIDS Drug Assistance Program and the Indian Health Service count toward TrOOP.
   
4. Amounts paid by or through qualified State Pharmaceutical Assistance Programs (SPAPs), most charities, health savings accounts, flexible spending accounts, and medical savings accounts count toward TrOOP.

There will be NO CHARGE for medications once the enrollee meets the catastrophic phase in 2024. According to the Kaiser Family Foundation once an enrollee personally pays approximately $3,300 in 2024 he or she will have no further costs for covered medications in 2024. (This number will vary according to the actual medications an individual takes and in a number of cases will be lower than the Kaiser Family Foundation projection. We have software that can project when a beneficiary will meet the catastrophic threshold in 2024 based on his or her list of medications; please contact us at 561-734-3884 or 877-734-3884 (TTY: 711) and we can make these projections for you.)

Part D carriers previously paid 15% of the cost of medications in 2023 once the out-of-pocket threshold was met. In 2024 carriers will be required to pay 20% of the cost of medications once this threshold is met; Medicare pays the balance of the cost.

Individuals on expensive medications will be greatly benefitted by this change to the catastrophic coverage stage. For example, the Kaiser Family Foundation has reported that enrollees on one of the top five high-cost, commonly used cancer drugs will be reduced by thousands of dollars in 2024. For example, those on Pomalyst will save $8,500; while those on Revlimid, Imbruvica, Jakafi, and Ibrance will save $6,400, $6,400, $5,900, and $5,000, respectively.

Because of this change to the catastrophic phase in 2024, those who buy some medications outside of the plan (e.g., from Good Rx or other non-plan resources) and who otherwise would meet the out-of-pocket threshold should consider changing their strategy and buy all their medications through the plan in 2024, as this could result in lower costs. This recommendation will be even more important in 2025 (see FAQ 4) because of the changes being made to drug plans next year.

Drug formularies (the list of covered medications) differ between all carriers and even between different plans offered by the same carrier.

Other Changes For 2024

1. People with Medicare who have incomes up to 150% of the Federal Poverty Level (FPL) and resources at or below the limits for partial low-income subsidy benefits will be eligible for full benefits under the Part D Low-Income Subsidy (LIS) Program. This program is also referred to as the “Extra Help” program, and this link from the Medicare.gov site contains more information and an application to apply for the program.. The Inflation Reduction Act eliminates the partial LIS benefit currently in place for individuals with incomes between 135% and 150% of the FPL. Nearly 300,000 low-income people with Medicare currently enrolled in the LIS program stand to benefit from the program’s expansion. Up to 3 million people could benefit from the Low-Income Subsidy program but aren’t presently enrolled. See this Fact Sheet for more information.
2. Future increases in the national average monthly PDP premium will be limited to 6% from the prior year. Previously, there was no cap on this premium. This premium is utilized to calculate late enrollment penalties for those who have gone 63 days or more without what is called “creditable drug coverage” since becoming eligible for Medicare. (The late enrollment penalty is calculated by multiplying 1% of the national average PDP premium for the year by the number of months the enrollee has not had creditable drug coverage, and this is a MONTHLY penalty that is payable the entire time the Medicare beneficiary Medicare drug coverage.) The 6% cap applies to calculating the national average monthly PDP premium BUT does not apply to individual plans; individual Part D premiums can increase more than 6%. See FAQ 9.

Drug plans will experience significant changes in 2025.

Out-of-pocket drug spending for covered medications will be capped at $2,000; this number will be indexed starting in 2026.

The coverage gap (aka “donut hole”) phase will be eliminated. This means that copays/coinsurance levels will remain unchanged from the initial coverage level until the $2,000 cap is met. Once that cap is met, there will be no cost for covered medications to the beneficiary.

This means that all plans will have a maximum of three different phases: (1) the deductible phase, if any; (2) the initial coverage level phase; and (3) the catastrophic phase.

The $2,000 out-of-pocket calculation will be based on a True Out-Of-Pocket Costs (TrOOP) calculation which will work differently than the way TrOOP was calculated in 2024.

TrOOP will be calculated based on two different formulas: it will first calculate in accordance with the deductibles, copays and coinsurance for the plan you have selected [this is almost always an “enhanced benefits” model, as few plans will choose to use the “standard benefits” model (see next sentence)]. Secondly it will calculate based on the “standard benefits” model, which assumes your plan has a $590 deductible for all tiers and that all tiers are paid at 25% coinsurance. Both calculations will consider the chosen plan’s formulary when making these calcuations.The $2,000 catastrophic level is considered met when EITHER model produces a calculation of $2,000 in out-of-pocket expenses. This is very complicated to explain, but the point is that you can be considered as having met the $2,000 level when your actual expenses under your chosen plan are less than $2,000.

Manufacturer’s discounts will no longer be counted in the TrOOP calculation. Drugs must be purchased through a network pharmacy or out-of-network in accordance with the plan’s out-of-network policy (e.g. emergencies). Drugs must be on the plan’s formulary or the beneficiary must have a formulary exception for that drug.

Additional details on TrOOP calculations are included in this article.

Carriers also have the option of offering “enhanced” benefits such as folic acid, 50,000 units of Vitamin D, and sildenafil/tadalafil. Payments a beneficiary makes for an enhanced medication will not count as TrOOP, and beneficiaries will pay the same for an “enhanced” medication during all drug plan phases.

Part D enrollees will have the option of spreading out their out-of-pocket costs over the year rather than face high out-of-pocket costs in any given month. This is called the Medicare Prescription Payment (M3P) Plan. Under this program beneficiaries will have the option of spreading out their prescription payments over the year (this is called “smoothing). Carriers are interpreting the M3P requirements differently and, hopefully requirements will be standardized and all carriers will be administering this program the same way. Beneficiaries who expect to reach $2,000 in out-of-pocket costs or who expect to buy an expensive medication ($600 or more) are most likely to be those who benefit under this plan. Beneficiaries will need to enroll in this program and, if enrolled, will pay their medication costs to the carrier rather than the pharmacy.

NOTE: The latest interpretation and, to our knowledge, the most accurate description of how the M3P program works is that an individual must spend at least $600 on a specific drug in a particular month in order to qualify for the program. The program works on a medication-by-medication basis. ONLY when an individual spends $600 or more in a particular month on a specific drug can the beneficiary request that drug to be included in the M3P program. The program applies on a drug-by-drug basis and each drug can be included in the M3P program ONLY when the spend for that drug is $600 or more in a particular month. We’ve seen excerpts of a training program Medicare (CMS) gave to pharmacists, and this is how that training program explains how the program works.

Also, the share of Medicare Part D drug costs paid by plans, drug manufacturers, and Medicare will change. Most significantly, carriers will pay 65% of the cost of drugs in the initial coverage phase (instead of 75% in 2024) but will pay 60% during the catastrophic phase (instead of 20%) in the catastrophic phase in 2025.

Because of these changes, beneficiaries will see changes in their Part D plans in 2025. Changes could include a deductible of up to $590 for some or all drug tiers, and the copays or coinsurance in some or all tiers could change (including moving from a copay to a coinsurance in a particular tier). Premiums for stand-alone Part D drug plans will increase in many instances, and it is also possible drugs will be reclassified into different tiers and that changes in utilization management requirements (e.g., quantity limits or prior authorization) will be made for some plans.

Medicare Advantage plans that include drug coverage (referred to as Medicare Advantage Prescription Drug plans) must also comply with the Inflation Reduction Act requirements. Many MAPD plans will not have deductibles in their drug plans, but many plans are changing copays or coinsurance (or changing from copays to coinsurance for particular tiers) for some or all non-generic drug tiers.

Beneficiaries should read their Annual Notice of Change (ANOC) document when they receive it from their carrier. This document will communicate changes in the plan design and either mention other changes or refer beneficiaries to the plan’s formulary to determine drug tier and utilization management changes.

See the following Kaiser Family Foundation chart for changes between 2023, 2024, and 2025 regarding share of Medicare Part D drug costs paid by enrollees, Plans, Drug Manufacturers, and the government (i.e., Medicare) in each drug phase.

Please see this article from the Kaiser Family Foundation for a more detailed summary of the 2024 and 2025 changes.

Unless you're eligible for a Special Election Period, you must enroll in a Medicare Advantage Prescription Drug Plan or Medicare drug coverage (Part D):

• During your Initial Coverage Period (the period beginning three months before and ending three months after your 65th birthday month); or
• During the Annual Election Period which runs from October 15-December 7 for a January 1 enrollment.

Note: Medicare begins the first of the preceding month for individuals whose birthday is the first day of the month.

Some Medicare Advantage plans (called "MAPD" plans) include prescription drug coverage while others (called "MA" or "MA Only" plans) do not.

If you purchase a Medicare Advantage HMO or PPO plan without prescription drug coverage, you CAN'T purchase a separate Part D plan. You can purchase a separate Part D plan with a PFFS (Private Fee for Service plan) that doesn't provide drug coverage and with Medicare Savings Account plans and Cost plans (Cost plans are available on a very limited basis and are not available in Florida).

You can also purchase separate Medicare drug coverage (Part D) with a Medicare Supplement plan or with Original (Fee for Service) Medicare (i.e., without enrolling in either a Medicare Supplement or Medicare Advantage plan).

Although they must meet minimum Federal guidelines, Medicare Advantage Prescription Drug and separate Medicare drug coverage (Part D) differ markedly between carriers, and one of the most important differences is which drugs are covered and which are not. [There are 35 therapeutic categories of drugs, and carriers are required to include at least two drugs in each category, except they are required to include all drugs in these categories: HIV/AIDS treatments; antidepressants; antipsychotic medications; anticonvulsive treatments for seizure disorders; immunosuppressant drugs; and anticancer drugs (unless covered by Part B)].

Each carrier provides a formulary that lists which drugs are covered under that plan and which copay or coinsurance tier the drug falls into. Beneficiaries should always check the formulary to determine if their drugs are covered--and at which copay pay or coinsurance rate--before purchasing a plan. It's also a good idea to review your Medicare Advantage Prescription Drug or separate Medicare drug coverage (Part D) every year to see if your plan covers the medications you need now and may need in the upcoming year.

Be sure to talk to your doctor to see if you're taking the lowest cost medications available to you.

Because Part D plans can be designed to be actuarially equivalent to the standard benefit model (see FAQ 2) , these plans can have no or lower deductibles than required by the standard benefit model, copays and/or coinsurance can vary, and there can be other differences in plan design as well. Specific coverage will vary from plan to plan, so read your documentation carefully and make sure to check out which of your drugs are included in your plan’s formulary.

Medicare (CMS) has a formulary finder on their website that permits beneficiaries to enter their medications, dosages, and frequency of use and then lists the carriers that cover these medications in their formulary. After the beneficiary enters his or her drugs into the formulary finder there are various options as to how to present the findings: i.e., list in order of plans with the lowest premium; list in order of lowest premium AND cost of drugs; and list in order of plans with the lowest deductible.

Note: We use a sophisticated formulary finder called Search and Save. Our tool uses four different feeds from Connecture (Medicare.gov also uses data supplied by Connecture but the Search and Save system utilizes more extensive data than that used by Medicare.gov.) We can input clients’ medication data and determine which Medicare Advantage or separate Medicare Part D coverage plan has the lowest drug costs (considering both premium and the cost of the drugs) for clients and prospects.

Please contact us at 561-734-3884 or 877-734-3884 for help in determining your outpatient medication costs.

Plans are required to include medication therapy management including step therapy, quantity limits and prior authorization. Part D sponsors may substitute generic drugs for brand name drugs if the generic drugs have the same or lower cost sharing and certain conditions are met. In accordance with the Comprehensive Addiction and Recovery Act (CARA), plans may impose certain limitations to manage utilization for beneficiaries who are at risk of misusing or abusing frequently abused drugs, such as opioids.

You may owe a late enrollment penalty (LEP) if, at any time after your initial enrollment period is over there is a period of 63 or more continuous days when you don't have Part D or other creditable coverage (i.e. coverage that, as a minimum, meets the Part D standard benefit model).

The late enrollment penalty is assessed for EACH month that you haven't had creditable drug coverage.

The amount of the penalty changes annually and is based on each year's national average Part D premium ($34.70 for 2024). Note: the Inflation Reduction Act puts a cap of 6% concerning the percentage this number can increase from year to year. The 2024 number has been capped at 6% above the 2023 number, which was $32.74.

Part D Prescription Drug Plan premiums are adjusted if your income exceeds a certain level. This additional premium (called the IRMAA) will be deducted from your Social Security check and is in addition to your premium for the basic plan. (You will have to pay Social Security directly for any IRMAA payments if you are not drawing Social Security.)

The Bipartisan Budget Reconciliation Act of 2018 changed how IRMAA is calculated. See FAQ 9 in the Medicare Overview FAQs for details. See these charts at 2024 IRMAA Part D premiums.

Here are a number of ways you can save on drug costs.

In addition, this article by Bankrate contains a number of good suggestions. Bankrate suggests looking into patient assistance programs at www.rxassist.org (this site contains a wealth of other useful information); shop around for the best prices on medications; tread carefully using current credit cards (look closely before choosing to use a medical credit card), and talk to your physician about switching to generics.

For a complete listing of plans available in your service area please contact 1-800-Medicare (TTY users should call 1-877-486-2048) or go to www.medicare.gov. Your copy of Medicare & You 2024 also contains a listing of 2024 plans available in your general area. You can also contact us at 877-734-3884 (TTY: 711) for this information. (Medicare & You 2024, is published and mailed to all those enrolled in Medicare (except for the most recent enrollees) in late September. Note: the linked version of Medicare & You included here does not contain listings of plans in your general area.)