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Double-edged Side effects: The Inflation Reduction Act’s Part D Redesign

by | Jun 22, 2023 | Insights, Medicare Enrollment

Massive overhauls within the bowels of Medicare’s prescription drug program have been unleashed. Expect double-edged side effects in the coming months relative to Medicare Advantage and standalone Prescription Drug Plans.

The Inflation Reduction Act: Nimble notes for Medicare Beneficiaries.

The Good: The intention behind the Act is to reduce drug spending by the federal government and lower prescription drug costs for the Medicare consumer.

Out of the gate in 2023, the mighty move to cap the cost of a month’s supply of covered insulin has begun. Insulin purchased through Medicare Advantage or standalone D plans cannot charge more than $35 for a monthly supply. Starting July 2023, Medicare beneficiaries receiving continuous insulin through their medical pump (administered via Part B) will also share in the goodness of a $35 cap per one month’s supply.

Already in place, vaccines that are recommended by the Advisory Committee on Immunization Practices and administered under the benefit of Part D will no longer have cost-sharing requirements (this now includes the shingles vaccine).

Beginning in 2024 and continuing thru 2030, the Act will flatten commercial Medicare premium growth to 6% (per prior year). Once set in motion, the objective is to stabilize future spikes and ease hyper-reactions to commercial premiums.   

Over the next calendar, Low-Income Subsidies (LIS) for Part D enrollees will expand. Meaning individuals with incomes up to 150% of poverty (21,870) are eligible to receive full LIS versus partial benefits of years past: no premiums, no deductibles and low-to-no copayments for prescriptions within the new income corridor.

Arriving in 2025, $2000 will be the annual hard cap Medicare beneficiaries will pay for medications purchased at a pharmacy. This could mean substantial savings for Part D enrollees using brand-named drugs, whose scripts push them to the less popular, catastrophic threshold. This Rx hard cap will be indexed annually.

Eye-opening for 2025, an option for the beneficiary to pay for their medications in monthly installments, now known as “smoothing,” will launch. A beneficiaries’ Part D cost-sharing maximum can be “smoothed” over the course of the year, moving forward. 

Insurance carriers will approach these equations differently. Plan sponsors with a greater market share may not have to work so hard to find savings. Overall, the consumer wins!

The Not-so-Good: Good intentions can yield unruly consequences.

Utilization management will drastically swell. Consumers will be steered from using expensive brand-named medications (as seen on TV) to less costly generic substitutions and treatments. Prior authorizations, step therapy and strict quantity limits will be on the rise.

In 2024, formularies (the lists of medications offered per drug plan) may become shorter. Today, many menus offer more than the two drugs per therapeutic class requirement, yet in order to reduce spending, insurance carriers may have no other alternative but to narrow consumer choices.  

Rapid changes with a drug’s tier placement may become a common occurrence. Each quarter a prescribed medication has the possibility to jump to a new tier (copay level). Sticker confusion may become a common occurrence.

The Act now grants Health and Human Services the power to negotiate drug prices directly with their maker. Specific drugs without generic or biosimilar competitors found under Part D (starts in 2026) and Part B (begins 2028) will be targeted. Reactions from these looming regulations could stimy future innovations and slow drug breakthroughs as HHS will become more involved with price setting.

The tightening of these controls will place increasing pressure on the Medicare population, physicians, healthcare workers, as well as the pharmacist. Lines at the pharmacy may become longer as the landscape has now been altered. Practice patience.

The Wise: Realize that prescriptions may be harder to swallow in the days ahead.

The material impact the Act will create within the prescription drug market will reach far and wide. Being prepared is the best medicine. Know your Medicare strategy (there are several); understand how your benefits will / will not function.

Seek unbiased guidance relative benefits erosion within Advantage (Part C) plans. Understand where potential benefits may deflate, where liabilities may shift and how that may affect your circumstances and future care. Read the fine print. Do it often.

Standalone Prescriptions Drug Plans will continue to carve out agent commissions; thus, be prepared to self-serve. Discount cards will continue to flourish and entice usage away from Part D programs and encourage cash payments. 

The Act’s double-edged side effects will ripple through 2024. Buckle up. On the upside, all things point towards a greater emphasis on healthy senior habits. Walk the Boardman, join Pickleball or try yoga.

This is your year! Seize the moment and stay healthy, Traverse City!

Written by

Andi Dolan 


Andi Dolan, founder of Traverse Benefits, a locally owned independent insurance agency providing health, life and disability insurance solutions for individuals, employers and Medicare beneficiaries across Northern Michigan.

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