Inflation Reduction Act - Changes to Medicare Prescription Benefits

How Inflation Protection Act impacts cost of medications – 4 mins

On 8/16/2022, President Biden signed into law the Inflation Reduction Act. This act has several provisions which will impact Medicare Prescription Drug (Part D) coverage in the coming years.

Medicare Part D helps cover the cost of prescription drugs. Part D coverage can be purchased as a standalone plan or as part of a Medicare Advantage Plan. However, regardless of how you receive your Part D coverage, the Medicare rules remain the same.

Overview:

New guidelines for Part D coverage regarding medication costs — implemented over several years

2022 – Inflation protected medication costs

As of 10/01/2022 pharmaceutical manufacturers must pay a penalty if the cost of a medication increases faster than inflation over a 12 month period

2023 – Coverage for Shingles Vaccine at no cost

All adult vaccines recommended by the Centers for Disease Control and Prevention will be covered by Part D Plans without imposing Plan deductibles or cost sharing.
Also includes Varicella (chicken pox),Hepatitis A, Hepatitis B, Meningococcal B vaccines
The following vaccines are currently covered under Medicare Part B and therefore are not impacted by the new legislation: Influenza, COVID, and Pneumococcal/Pneumonia

2023 – Injectable Insulin’s = $35/month and not subject to the Plan’s deductible.

Included = Injectable insulins (either vial or pen) which are included in a Plan’s Part D Formulary (list of covered medications)
Not included = Oral diabetic meds or injectable A1C meds.
Important to make sure your Part D Plan has your chosen insulin(s) on their Formulary.

2024

Removal of 5% co-insurance during catastrophic phase

2024-2026 – Part D premium increase cap of 6%/year

2025 – Maximum out of pocket initiated

Medicare Beneficiaries with Part D Plans cannot pay more than $2,000 in out of pocket costs for medications.
The cap may be adjusted each year for inflation.

2026 the Federal Government can release negotiated cost for medications

The Federal Government will negotiate costs for up to 10 medications with pharmaceutical manufacturers. Hopefully, this will result in lower costs for some medications. However, since it is a negotiation, the medications and their costs will ultimately be determined by a compromise between the Federal Government and pharmaceutical manufacturers.
By 2029 the Federal Government can negotiate cost for up to 20 medications.
Please note that negotiations for lower cost with the pharmaceutical manufacturers cannot begin until a medication has been on the market for 9 years if it is a non-biologic or 13 years if it is a biologic.

Frequently Asked Questions:

In general how does the new legislation impact Part D coverage and benefits?

The legislation aims to reduce overall drug costs on Medicare Part D by giving Medicare the ability to negotiate drug prices, implementing a limit on out-of-pocket expenses in Medicare Part D and capping co-pays on insulins at $35 per month.

What medication costs can be negotiated under the new legislation?

In 2026 the Federal Government can release negotiated costs for up to 10 medications with pharmaceutical manufacturers. Hopefully, this will result in a lower of costs for some medications. However, since it is a negotiation the medications and their costs will be ultimately a decision and perhaps a compromise between the between the Federal Government and pharmaceutical manufacturers. Thus this also means negotiation may not result in the lower of costs for the medications one might wish. By 2029 the Federal Government can have negotiated cost for up to 20 medications. Please note that negotiations for lower costs with the pharmaceutical manufacturers cannot begin until a medication has been on the market for 9 years if it is a non-biologic or 13 years if it is a biologic.

Will out of pocket costs on Part D Plans be capped?

Yes indeed. As of 2025 Medicare Beneficial with Part D Plans cannot pay more than $2,000 in out of pocket costs for medications. The cap may be adjusted each year for inflation.

I have heard capping the Part D out of pocket costs may result in higher premiums, deductibles, and/or medication cost sharing. Is this true?

It remains to be seen if the 2025 premium cap will impact the benefits of Part D Plans. However, the new legislation does prevent Part D carriers from increasing premiums more than 6% each year for year’s 2024-2026.

I was told the new legislation also caps insulins costs at $35. Is this right?

Yes it is! As of 2023 Injectable insulins (either vial or pen) that are included in a Plan’s Part D Formulary (list of covered medications) cannot be more than $35 for a one month supply and are not subject to the Plan’s deductible. To be clear, this applies to injectable insulins only and NOT diabetic meds which are pills or are injectable A1C meds. This also means each year it is very important to make sure you Part D Plans has your chosen insulin(s) on their Formulary. If the insulin is not on the Formulary you will need to change insulin or pay the full cost. Remember, HTA can review your Part D Plan each year to make sure it is appropriate for you and your medications. The time to shop is during the Annual Enrollment Period between 10/15 and 12/07 each year. Look out for your annual reminder email from HTA!

Is it true my Shingles vaccine may cost less next year?

Yes! In fact the new legislation requires all adult vaccines recommended by the Centers for Disease Control and Prevention Advisory Committee on Immunization Practices to be covered by Part D Plans without imposing Plan deductibles or cost sharing. This include not only Shingles, but also Varicella (chicken pox),Hepatitis A, Hepatitis B, Meningococcal B. Remember the follow vaccines are currently covered under Medicare Part B and so are not affected by the new legislation: Influenza, COVID, Tdap (tetanus/diphtheria/pertussis) and Pneumococcal.

How will the new legislation affect Part D stages?

The stages of Part D Prescription Drug Plans which are part of all plans and the same for all plan (as they are set by Medicare), will not change until 2024. At that time, the catastrophic stage will be eliminated. However, the other stages will remain. Any changes in those stages will be announced by Medicare next year. Please remember, the maximum allowable Part D deductible and monetary amounts for each stage is set by Medicare and thus subject to change annually.

What is the new rule regarding medication costs in relation to inflation?

Great question! As of 10/01/2022 pharmaceutical manufacturers must pay a penalty if the cost of a mediation increases faster than inflation over a 12 month period (first period 10/2022 to 10/2023). The penalty will come in the form of rebate paid directly to the Medicare program. This ideally will encourage pharmaceutical manufacturers to be proactive in keeping drug costs lower in the beginning.

Rest assured HTA will be keeping abreast of upcoming details for the new legislation as the guidelines are rolled out over the ensuing years. Remember HTA is always here to answer your questions. In addition, you may find it helpful for us to review your Part D Plan options each year during the Annual Enrollment Period between 10/15 and 12/07. Please be on the lookout in September for an email reminder to either schedule an appointment consultation or request we email shop your Part D Plan.