Medicare’s drug benefit, known as Part D, will see major changes next year as part of a broader push to help the 50 million-plus Americans enrolled in the program manage the cost of medicines.
It’s one result of the Biden administration’s Inflation Reduction Act of 2022, which granted new authority for the government to directly negotiate with pharmaceutical companies over the prices of some drugs. The law also included two other big changes set to kick in next year: an option to “smooth” out co-payments for drugs on a monthly basis and a $2,000 cap on out-of-pocket spending for all people enrolled in Part D.
Because these provisions are new – and because Medicare benefits can generally be dauntingly complex – it’s important to understand how they work. A good time to look at them is ahead of the deadline for Medicare open enrollment, which hits on Dec. 7. While an enrollee can sign up anytime for the smoothing option, it’s useful to consider it as part of a holistic assessment of Medicare benefits. Too many seniors miss out each year on the chance to spend less for better drug coverage by shopping for a new Part D plan.
Here’s what you need to know about changes to Medicare Part D.
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How can you ‘smooth out’ your co-pays through Medicare Part D?
This new prescription payment plan, also known as the M3P option, is meant to help people who can’t immediately cover a large co-pay at the pharmacy and have to forgo picking up needed medicines.
Now, you have the option to spread co-pays for drugs covered by Part D over a single calendar year. While you can opt in at any time, this is likely to be especially helpful early in the year – before the new $2,000 limit on out-of-pocket costs is met – if you expect high prescription drug costs, according to Juliette Cubanski, deputy director of the Medicare policy program at the nonprofit KFF.
“This plan doesn’t save you money over the course of the entire year,” she added. “It just helps you spread your out-of-pocket costs out over time.”
That said, for people with inexpensive prescriptions, the smoothing option might not be worth it. Instead of just letting you pay at the pharmacy, it adds an extra monthly bill to manage covering the spread-out costs of co-pays.
One of the best bets is to check Medicare’s online screening tool, which estimates when the smoothing option is worth it for people who might have to fork over $2,000 in out-of-pocket drug costs before October 2025.
The reason this new option runs on a calendar-year basis, rather than 12 months, reflects the design of Part D. Insurers go through an annual bidding process to win the business of managing Medicare, including the stand-alone Medicare Part D plans and Medicare Advantage plans (where insurers manage Medicare benefits covering hospital and physician care as well as the pharmacy benefit). So the co-pays owed for a medicine fall under the total costs estimated for an insurance plan, which is calculated on a calendar-year basis.
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Why isn’t Part D simply covered by a traditional Medicare card?
The reason is that Medicare has changed in many ways since Congress enacted the program in 1965, when it only covered bills for hospital care and doctor appointments. In some cases, it also covered drugs administered in doctors’ offices and hospitals, but it didn’t include a benefit for routine prescriptions that people purchase at pharmacies.
In the decades that followed, however, drug prices rose – in some cases dramatically – which fueled the political momentum to add a drug benefit.
When the GOP-controlled Congress finally created this benefit in 2003, during the George W. Bush administration, it opted for a major policy shift: It created a new benefit that would be entirely managed by health plans. The idea was that insurers would submit bids to Medicare and compete on price, thereby saving taxpayers money.
Democrats and Republicans have argued ever since about whether that approach actually works better than having the federal government – with its massive budget and bargaining clout – directly negotiate prices for Part D medicines.
Then, in 2022, when Democrats controlled both the presidency and Congress, they included in the Inflation Reduction Act a provision to give Medicare this authority over certain drugs. The first set of negotiated Part D agreements is due to take effect in 2026, with reductions set for 10 widely used drugs, including diabetes and psoriasis treatments and the Eliquis drug for preventing blood clots.
Other changes to Medicare already enacted under the Inflation Reduction Act include a $35 monthly cap on insulin costs for diabetes patients and more financial assistance on Part D costs for low-income seniors.
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Will Republicans seek to repeal the IRA or eliminate these benefit changes?
It’s too early to say what will happen.
Republicans voted against the Inflation Reduction Act and continue to oppose many of its core provisions, including on clean energy. But in his first term, President Donald Trump spoke favorably about the concept of Medicare drug negotiations. It’s unclear yet what his approach will be to those negotiations now that they’re already underway. Another question the Trump administration will have to resolve is whether Medicare and Medicaid (the federal-state program providing health insurance for lower-income Americans) will cover the new generation of weight loss drugs, proposed by the Biden administration on Tuesday.
More broadly, though, there has long been bipartisan support for a cap on out-of-pocket Part D drug expenses, including from Trump in his budget requests in his first term. And when Sen. Mike Lee (R-Utah) last year introduced a bill that would have done away with the drug negotiations and the $2,000 cap, he attracted only one co-sponsor for the measure, Sen. Marco Rubio (R-Fla.) – whom Trump has selected as his pick for secretary of state.
In general, it’s up to Congress and the president to make major shifts in policy – even though the Centers for Medicare and Medicaid Services makes some small changes each year in the rules governing Part D plans. Otherwise, decisions affecting Part D, including the continuation of the smoothing provision and the $2,000 cap, are likely to be shaped by Trump’s picks to lead CMS and the Department of Health and Human Services, said Rodney Whitlock, a vice president at McDermott+Consulting who previously served as a GOP health policy adviser to the Senate Finance Committee.
“If an appointee in a critical place believes strongly in those provisions, they could move forward,” Whitlock said.
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Where can I find more information on Medicare Part D?
One of the best tools for comparing Part D plans is the online Medicare plan finder. For those who need help navigating this website, the State Health Insurance Assistance Programs has a network of local advisers who aren’t funded by money from companies. Another helpful resource, recommended by The Washington Post’s personal finance columnist, Michelle Singletary, is the book “Get What’s Yours For Medicare.”
This kind of help is often needed because shopping for Part D coverage can be daunting – made worse by a blizzard of insurers’ marketing. That’s why so many people decide to stick with their current coverage without checking whether they could get something better for their needs, said Amy Niles, the chief mission officer for the Patient Access Network Foundation.
“It’s all very confusing,” Niles said. “But if there were ever a year to do so, it really is this year.”
As she points out, many enrollees may find that their current Part D plan is no longer offered for 2025 – or that changes have been made that might affect which drugs are covered and what they need to do to get that coverage.
Enrollees should also know that the Inflation Reduction Act included provisions that changed the rules for Part D’s financial safety net for insurers, known as reinsurance. This may result in insurers requiring more prior authorizations for medicines and setting more limits on drug choices, causing some to drop certain Part D plans. In fact, the number of stand-alone Part D plans will drop by roughly a third in 2025, to 464, according to KFF. Still, people most often will have a choice of at least a dozen stand-alone plans, plus many Medicare Advantage drug plans.
(c) Washington Post