The Inflation Reduction Act of 2022 significantly impacted how the Medicare Prescription Drug Program would operate in 2025. In short, the purpose was to improve affordability, predictability of costs, and access to medications for those enrolled in Medicare.
The biggest change for 2025 will be the elimination of the Coverage Gap, commonly referred to as the Donut Hole, under the Prescription Drug Program. The new blueprint contains three (3) phases vs the previous four (4) phases. Beginning in January 2025, the Medicare Prescription Drug plan design will be structured as follows:
Deductible Phase ——— Initial Coverage Limit Phase ——— Catastrophic Phase
The maximum deductible that can be applied to the drug portion in 2025 is $590.00. Please note that not all plans may include a deductible on their drug plan in 2025.
Once a member enters the Initial Coverage Limit phase, they will be responsible for paying a cost-share towards the purchase of the medication. These costs may be in the form of a flat co-payment amount or a percentage of the cost, i.e., 25% of the retail cost. Medicare members will remain in this phase until they reach $2,000 in total out-of-pocket drug costs in 2025. The $2,000 is the combination of the deductible amount (if applicable) and the co-payments and/or the percentage of the costs they incurred while in the Initial Coverage Limit phase.
Once you achieve $2,000 in drug costs, you move to the Catastrophic Phase, and you will no longer have any drug costs associated with your medications at the time of refill.
The second piece of significant news regarding the drug plans for 2025 is the creation of the Medicare Prescription Drug Payment Plan (known as M3P). This is a program simplifies the cost-sharing structure of the drug program during the Initial Coverage Limit phase. In short, the M#P allows Medicare beneficiaries to elect to spread out the costs of their medications throughout CY 2025 instead of paying the potentially high costs of their medication at the beginning of the year. For example:
Assume that a Medicare beneficiary is enrolled in a drug plan with no drug deductible and their monthly out-of-pocket drug cost is $500/month starting in January 2025. If the beneficiary is enrolled in the M3P plan with their Medicare carrier (PDP or MAPD), they would pay $167 at the time of purchase instead of the full $500. In February they have an additional drug cost of $500, however, they will only be responsible for $76 at the time of purchase due to the formula. In March, they again have a $500 drug bill but are only required to pay $126 and lastly in April 2025 they have another $500 in drug costs and will be responsible for a payment of $181. At this point, the member has reached the $2,000 annual out-of-pocket drug cost max for 2025. Therefore, for the remaining nine (9) months (April through December) they will be billed $181 by their drug plan.
Some Key Points Regarding the M3P Program:
- Medicare beneficiaries can opt into this M3P program with their Medicare Drug Plan carrier beginning in October 2024 for a January 1, 2025, effective date.
- A Medicare beneficiary “must” re-enroll in this plan every subsequent year. The program DOES NOT auto-renew.
- All medications are included in the formula, not just high-cost medications.
- The M3P program DOES NOT include Medicare Part B drugs, only Part D medications.
- It is important to remember that this is a budget tool and NOT a cost-savings tool for Medicare beneficiary’s medications.
The M3P program will allow a Medicare beneficiary to spread out their total out-of-pocket cost of $2,000 in drug costs over the 12 months of 2025 instead of paying the full $2,000 annual out-of-pocket cost by April 2025.
If you have questions regarding this program, please contact the MBA’s Medicare Program Partner, MPC Insurance Group, LLC at 717.980.3201 for additional details