by Lance D Reedy
Introduction
Congress authorized the Part D Prescription Drug Plans (PDPs) which was one part of the 2003 Medicare Modernization Act (MMA). Another major aspect of the MMA legislation was establishing the latest rendition of the privatized Medicare plans, known as Medicare advantage.
The original construction of the PDP plans consisted of four phases. Note: I have simplified this discussion for easier understanding.
- Phase One: You had to pay the $250 deductible.
- Phase Two: You paid 25% of the retail cost of the prescriptions until the retail amount of your drugs was up to a specified amount.
- Phase Three: You then paid 100% of the drug cost while in the coverage gap or the doughnut hole.
- Phase Four: You paid 5% for name brand drugs if/when you hit the catastrophic stage.
Medicare allowed for some modifications right off the bat in 2006 and in the ensuing years as long as the modifications were as good as or better than the original model. Examples:
- Some plans had no deductible but had a higher premium.
- Many plans had fixed copays rather than paying the 25% co-insurance.
- Some low premium plans had no deductible for tier 1 and 2 generics, but a they had a deductible for tier 3, 4 and 5 drugs.
As common name brand drugs such as Lipitor (atorvastatin), Norvasc (amlodipine), and Toprol (metoprolol succinate) went generic, many plans offered super low copays for these new and existing generics. The following are some common examples:
- Tier 1 generics: Zero to $2 copays
- Tier 2 generics: $4 to $7 copays
The 100% cost in Phase 3 dropped to 50% somewhere around 2015, and then it dropped by 5% per year until around 2020. The cost for generics and name brands in the coverage gap now stood at 25% through the end of 2024.
Inflation Reduction Act Legislation
On August 16, 2022, President Biden signed the Inflation Reduction Act (IRA) into law. One of the provisions of this act was to lower prescription costs. The following changes were scheduled for the PDPs.
- 2024: Phase 4 was eliminated. If you went through the coverage gap and hit the catastrophic stage, you no longer paid 5% for brand name drugs.
- 2025: Phase 3 will be eliminated. There will now be a $2,000 cap on the amount that any PDP member pays for his/her drugs. The $2,000 cap will rise with inflation.
This is all very good news for PDP members with high prescription costs. However, the law of unintended consequences has come into play.
Disclaimer: We are forbidden by Medicare to discuss any specific PDP information such as copays, premiums, and other specific plan details until October 1. For example, we can’t say that the 2025 Acme Good Health Premier plan will be $55 per month and have such and such copays for their various tiers. That’s prohibited until October 1.
We can speak in broad terms about general trends as long as we don’t discuss a specific plan.
Unintended Consequences
As yourself this question: If legislation dictates that the PDP companies will now pay the 25% when members hit the coverage gap, what will that do to the premiums for their plans? Obviously, no company or business can operate at a loss, so the PDP companies have been forced to raise their 2025 premiums. The question is, how much?
A major uproar happened (we can guess) with the officials at the Center for Medicare and Medicaid Services (CMS) when the PDP companies submitted their bids (proposed premiums) for the 2025 plan year. We can only guess that the bids were shockingly higher.
There is also the political aspect. Obviously, this is an election year, and the politicians don’t want to see the senior citizen voting block angered by big price hikes. I don’t think the signees of the 2022 IRA legislation considered this conundrum.
As I write, there is still plenty of behind-the-scenes skirmishing occurring in the halls of government. I suspect that the head honchos are scrambling for more subsidies for the PDP companies to mitigate the higher premiums. Without mentioning any specifics, here are some speculations for 2025 PDP changes.
- Premiums will rise. How much is still up in the air.
- One major PDP player is calling it quits.
- There will some plan consolidation. Let’s say our fictitious Acme Good Health has their Value, Basic, and Premier plans. They may shrink their offerings to just two or even one plan. For example, if Acme decides to go with just their middle Basic plan, then their Value and Premier members will automatically be moved to Acme’s Basic plan. This change may or may not be the right plan for you in 2025.
- Agent service renewals are being cut or eliminated by some PDPs. Needless to say, the agent community isn’t too happy about this. Promises are being broken.
Annual Notice of Change
You should receive your plan’s Annual Notice of Change (ANOC) by US Postal Mail during the latter part of September. Previously, some clients reported to us that they received their ANOCs in October or even never at all.
PLEASE READ YOUR ANOCs! They will disclose the following:
- If your plan will be cancelled at the end of 2024 and your company is quitting the PDP market.
- Your 2025 plan premium.
- If you’re being moved from one plan to another within the same company.
- Your copays and/or coinsurances for 2025.
- Your 2025 deductible amount.
- Tier changes.
- Changes in the formulary or changes of important prescriptions or even dropped scripts.
Please feel free to contact us with any questions regarding your ANOCs. You can share with us the info on your notice prior to October 1, but as mentioned earlier, we are forbidden to provide any specific information about plan details before that date.
Our Promise to You
We will continue to provide you with our high level of service in securing your best buy for your 2025 PDP. With so many looming changes, we expect things to be unusually busy to say the least.
We hope that your 2024 plan will remain your best buy for 2025. For sure, that simplifies matters.
Since many popular plans will not be working with agents, we’ll likely be doing less paper or e-applications. If, for example, the Acme Health Basic plan is your best buy for 2025, we’ll provide you with their toll-free call center number to sign yourself us. Alternatively, we’ll be happy to sign up as many of you as possible on Medicare.gov, time permitting.
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