The Inflation Reduction Act of 2022 introduced several important changes to the Medicare program aimed at lowering costs for beneficiaries. One of the most anticipated changes will establish a cap on Medicare prescription drug costs, but it remains inactive until 2025. However, you may not have to wait for next year to see reduced prescription drug costs.
At the start of 2024, an in-between measure took effect which eliminates coinsurance once drug spending reaches a specified level. Prior to this change, seniors could be responsible for unlimited costs, but now Medicare beneficiaries can calculate a maximum amount they might pay for prescription drugs in 2024.
Learn more about Medicare coverage and 2024 changes in our upcoming webinar: Understanding Medicare and What’s New in 2024.
Medicare Part D 2024 Changes
In past years, out-of-pocket prescription drug costs were unlimited and could easily add up to tens of thousands of dollars per year. As a response to this problem, Congress made significant changes to Medicare drug cost sharing. One of these changes began this year – the elimination of the 5% coinsurance owed during the “catastrophic coverage phase.”
The catastrophic coverage phase begins when total drug spending reaches $8,000 – including costs paid by you, the Medicare program, your Part D insurance, and drug manufacturers. Due to cost sharing between all these entities, your maximum share of costs prior to the catastrophic coverage phase is about $3,300.
Those who need high-cost drugs stand to save thousands of dollars this year. For example, the cancer drug Pomalyst cost Part D enrollees an average of $14,900 out-of-pocket prior to the change. Now, costs are limited to the roughly $3,300 owed prior to the catastrophic coverage phase. In this simple example, the Medicare beneficiary would save over $10,000 on a single drug.
Further Medicare Part D Changes Are Coming in 2025
As previously mentioned, a true cap on prescription drug costs will take effect next year. This change will limit your out-of-pocket costs to $2,000 per year – indexed for inflation. Additionally, the calculation of out-of-pocket drug costs will simplify next year with the elimination of the “coverage gap” phase.
To implement these changes, the share of costs borne by the Medicare program, Medicare Part D plans, and drug manufacturers will change. However, your share of costs will remain the same as previous years until you reach the out-of-pocket cap.
Additional Medicare Changes in the Inflation Reduction Act
Cost sharing was just one provision of the Inflation Reduction Act that impacted Medicare beneficiaries. Other changes include:
- Insulin costs have been capped at $35 per month since 2023.
- Covered vaccines have been available at no cost since 2023.
- More people are eligible for the full low-income subsidy starting in 2024.
- The calculation of premiums changed in 2024 to limit annual increases to no more than 6%.
- Beneficiaries will have the option to spread out-of-pocket costs over the course of the year rather than owing them in the first few months starting in 2025.
The Medicare program has always been confusing, but the long list of recent changes makes it even more difficult to estimate your coverage and costs. An experienced financial advisor can help you understand your Medicare coverage and how the recent changes impact you.
To learn more about these changes, attend our upcoming webinar Understanding Medicare and What’s New in 2024 or contact an experienced financial advisor.
Demystify Medicare Benefits with A Personalized Analysis from Meld Financial
From deciding whether to enroll in a Medigap or Medicare Advantage Plan to determining which services are covered, Medicare can be a headache to understand. Fortunately, the advisors at Meld Financial can help.
We have spent nearly four decades helping clients achieve their retirement goals, including planning for Medicare. Our team can analyze your current coverage, answer your questions, and help you maximize your government benefits.
To discuss your Medicare questions, contact a member of our team today.
