What is the Inflation Reduction Act of 2022?
The Inflation Reduction Act of 2022 as it relates to Medicare Part D has been referred to as the “drug law”, and it requires CMS to establish a Part D manufacturer discount program beginning on January 1, 2025 as part of the redesign of Medicare Part D. This program will replace and eliminate the existing Coverage Gap or “donut hole” stage of Part D and establish a Max out of Pocket for Part D of $2,000 for the Catastrophic stage of Part D.
Medicare Prescription Payment Plan
Coupled with the replacement and elimination of the Part D Coverage Gap, the Inflation Reduction Act introduced the Medicare Prescription Payment Plan. The Medicare Prescription Payment Plan or MP3 as it has been called offers the Part D or Medicare Advantage enrollee the option to pay out-of-pocket prescription drug costs in the form of capped monthly payments instead of all at once at the pharmacy. It also requires the Part D and Medicare Advantage plan insurance companies to provide their enrollees with the option to pay out-of-pocket costs in the form of monthly payments over the course of the plan year instead all at once at the pharmacy.
Once an enrollee elects to opt into MP3, program participants will pay $0 to the pharmacy for covered Part D drugs, and Part D and Medicare Advantage plan companies will then bill program participants monthly for any cost sharing they incur while in the program. Pharmacies will be paid in full by the Part D or Medicare Advantage plan company in accordance with Part D prompt payment requirements.
The Medicare Prescription Payment Plan will only be beneficial for anyone who is not receiving any Extra Help or Low-income Subsidy (LIS).
How do you determine if you can benefit from MP3?
According to CMS, if an enrollee is likely to have a $600 charge at the pharmacy on a single prescription or in a single month, they are likely to be a good candidate for the Medicare Prescription Payment Plan
When can an enrollee opt into MP3?
Any Part D or Medicare Advantage plan enrollee can opt into the program prior to the beginning of the plan year or any month during a plan year. When a request is received during the plan year, the Part D or Medicare Advantage plan company must process it within 24 hours of receipt.
How can I opt out of MP3?
Part D or Medicare Advantage insurance companies must have a process in place to allow their program participants to opt out at any point during the plan year. After opting out, the individual will pay any new out-of-pocket costs directly to the pharmacy.
Can Part D or Medicare Advantage enrollees be terminated from MP3?
Yes. If a participant fails to pay the monthly bill to the Part D or Medicare Advantage plan company, their participation in the program may be terminated following a required two-month grace period. However, Part D and Medicare Advantage plan companies must have a reinstatement process to allow individuals to resume participation in the Medicare Prescription Payment Plan in the same plan year.
Changes expected to Medicare Part D and Advantage plans
It is expected that premiums will increase drastically in 2025 due to the $2,000 Max out of Pocket that is due to be implemented at the beginning of the year. We also expect to see certain high-cost prescriptions no longer on formularies with most Part D plans. It is also expected that many Medicare Advantage plans will now have premiums or cut back on benefits within the plans for 2025. Also, the standard annual deductible for Part D in 2025 is going from $545 to $590.
While the intention of the Inflation Reduction Act was for the good of Part D and Medicare Advantage plan enrollees, unintended consequences are likely to happen due to Part D and Medicare Advantage plan companies having to shoulder more of the costs of prescriptions.
Going into the Annual Enrollment Period in 2024, it is advisable to have your plan reviewed if you haven’t done so in the past. Due to the Inflation Reduction Act, your plan will change and seeking the help of a trusted experienced advisor can help you navigate these changes. For help with navigating the Medicare Annual Enrollment Period and the Inflation Reduction Act for 2025, reach out to us here. If you’re new to Medicare and want more information about Medicare, including enrollment into Parts A and B, Part D, Medicare Advantage and Medicare supplement, you can get more information here.
