The Inflation Reduction Act (IRA) introduced substantial changes to Medicare Part D, prescription drug coverage, that can potentially save your clients significant amounts of money. As the annual Medicare Open Enrollment Period (OEP) approaches, it’s imperative to understand these changes so you can help your clients.
The law’s impact on insulin costs for Medicare beneficiaries
For many Medicare beneficiaries, insulin is a lifeline; but historically, it has come with a significant price tag. In 2020, a review of Medicare drug plans revealed copayments for insulin ranging from a meager $2 to a staggering $200. The Centers for Medicare and Medicaid Services (CMS) attempted to address this issue with the Senior Savings Model, capping the cost of injectable insulin at $35. However, this solution was not comprehensive. Some plans opted out and it did not cover insulin administered via pumps.
The IRA has stepped in as a game-changer. Starting January 1, 2023, all injectable insulins covered under Part D now come with a uniform cap of $35. As of July 1, 2023, those who rely on insulin pumps also benefit from this cap, putting an end to the average monthly 20% coinsurance, which hovered around $55.
(Note: It’s essential to mention that this provision doesn’t extend to oral medications for Type 2 diabetics or non-insulin injectable drugs.)
Impact on vaccine coverage
Medicare beneficiaries may have vivid memories of childhood vaccinations, including the polio shot, which was perhaps their earliest encounter with vaccines. Today, there’s a plethora of vaccines addressing more than 20 diseases identified by the U.S. Department of Health and Human Services.
Just as with insulin, Medicare’s coverage of vaccines was a split affair, with Part B covering some and Part D handling the rest. Part B shoulders the cost of flu, pneumonia, COVID-19, hepatitis B, and certain other vaccines required for injury treatment or direct disease exposure. Importantly, there are no deductibles or copayments for these crucial vaccinations.
However, Part D takes charge of all other vaccines, such as shingles (known as Shingrix), hepatitis B for non-high-risk individuals, and DTaP (diphtheria, tetanus, pertussis). These vaccines often came with a hefty copayment — for instance, around $200 for a single Shingrix injection, which requires two doses.
The IRA has introduced equity in vaccine coverage. As of January 1, 2023, there are no more copayments for Part D vaccines, leveling the playing field and making essential vaccinations more accessible to all beneficiaries. Additionally, the RSV (respiratory syncytial virus) vaccine, set to become widely available, is a Part D vaccine without copayments.
A word of caution: Advise your clients to get their Part D vaccinations at in-network pharmacies instead of their physicians’ offices. This small change can save them from unnecessary costs, hassle and paperwork.
A sneak peek into 2024: The end of catastrophic coverage coinsurance
Arguably one of the biggest changes looming on the horizon for Part D is the elimination of catastrophic coverage coinsurance, slated for 2024. To appreciate the significance of this change, you need to fundamentally understand the Part D drug payment stages.
Before entering the world of Medicare, individuals typically pay a consistent price for their medications throughout the year. However, Part D introduces four distinct payment stages:
- Deductible: Medicare sets the standard deductible, which varies by plan. It can reach a maximum of $505 in 2023 ($545 in 2024). Generally, this applies to Tier 3 and Tier 4 drugs, which are typically brand-name or more expensive generics.
- Initial coverage (cost after deductible): Beneficiaries typically pay 25% of the medication cost, with the plan covering the rest. However, many plans opt for a copayment, such as $3 or $10 per medication.
- Coverage gap, or the infamous “donut hole”: In this stage, due to discounts, beneficiaries pay 25% of the drug cost.
- Catastrophic coverage (cost after coverage gap): This stage kicks in once the out-of-pocket costs plus the value of discounts in the donut hole hits $7,400. Approximately 1.5 million drug plan members reach this stage each year. In 2023, they pay the greater of $4.15/$10.35 or 5%, depending on the drug.
To illustrate the financial implications of these stages, consider one drug advertised on television. Once beneficiaries reach catastrophic coverage, they pay 5% or $1,368 for a month’s supply. But that cost is likely to change. If the retail cost of the drug rises (which it likely will), the beneficiary will be required to pay more.
In 2024, catastrophic coverage coinsurance will vanish. After reaching this stage ($8,000 in out-of-pocket costs and donut-hole discounts), beneficiaries will pay nothing for their drugs. Given today’s costs, this change could save a patient at least $16,000 in the coming year for that one TV drug.
Navigating Medicare’s open-enrollment period
As a financial advisor, you can play a pivotal role in guiding your clients through the following timeline.
- Before October 15: Encourage your clients to open and read their Annual Notice of Changes. (Part D drug and Medicare Advantage plans must send every beneficiary a notice at least 15 days before the start of open enrollment.) This outlines changes in benefits, coverage, formulary, pharmacies, premiums and costs that will take effect on January 1.
- In October and November: Advise your clients to dive into the 2024 plans using the Medicare Plan Finder at medicare.gov/plan-compare. Take the opportunity to compare your clients’ current plans with other plans available in their area.
- Anytime between October 15 and December 7: If clients determine that a different plan would work better, they must enroll in it before December 7. (It’s even better to complete this before late November to avoid the last-minute rush.) Enrolling in a new plan automatically disenrolls a Medicare beneficiary from their current plan. Conversely, if a client’s current plan will work best in 2024, they can choose to do nothing, and they’ll be reenrolled automatically.
As we approach the Medicare Open Enrollment Period, it’s the perfect time to engage your clients, provide them with the latest information, and assist them in reviewing their healthcare plans. By doing so, you empower them to make choices that not only safeguard their health but also protect their financial interests. In the realm of financial advising, these actions are a testament to your commitment to your client’s well-being and financial security.
Diane Omdahl, a registered nurse, has been a trailblazer in the Medicare industry for over 30 years. She started her first company in the basement of her home and developed it into a multi-million-dollar organization providing Medicare-related training and tools for home health agencies and long-term care facilities. Diane now operates 65 Incorporated and i65, providing unbiased and expert Medicare enrollment guidance to seniors, their families and professional advisors. She recently published “Medicare For You: A Smart Person’s Guide.”