Medicare Part D Updates
Today’s video clarifies issues which are commonly misunderstood about Medicare’s Prescription Drug Plans, Part D. Part D benefits began in 2006 and have improved in important ways. When the program started, after spending so much on drugs in a given year, one reached the “Coverage Gap” or so-called “donut hole” where there was no coverage until reaching a catastrophic level which most people would not meet in a given year. The catastrophic level was part of the benefit design to protect those with extremely high drug costs.
After meeting a deductible, those enrolled in a Part D plan are in the Initial Coverage Phase and pay approximately 25% of the cost of their drugs. Prior to 2019, the Initial Coverage Phase was followed by the dreaded donut hole. The Affordable Care Act which was passed in 2010 and upheld by the Supreme Court in 2012 included slowly closing the donut hole by 2020 but it was actually closed a year early in 2019. The donut hole is considered closed as beneficiaries pay exactly 25% of the cost of their medications during this coverage period. If the beneficiary spends $7,400 on medications in 2023 they reach the “Catastrophic Coverage” phase, when the amount they have to pay is reduced to 5% of the cost of medications but costs are not eliminated. Then on January 1 of the following year, the whole process resets.
Because the government continues to use the term “Coverage Gap” it is easy to miss the fact that drug coverage is so much better than what it used to be. That’s great news.
In 2025, drug coverage under Medicare Part D will become even more valuable because plans will be structured with a $2,000 out-of-pocket maximum. There has never been a Part D out-of-pocket maximum. The confusion surrounding the new out-of-pocket maximum relates to its timing. The out-of-pocket maximum is not in effect until 2025.
One final note that I don’t believe I mentioned in the video is that the government has for a number of years now increased the deductible level that plans can offer. It is a maximum of $505 in 2023. Of course, increased deductibles have led to a lower increase or even a decrease in premiums. We’ll have to wait and see if this trend continues now that an out-of-pocket maximum has been added to the benefit design.
Aside from the complexity of the Part D benefit design, our message today is resoundingly positive: the donut hole is closed and after two more years, Part D plans and Advantage Plans that include drug coverage will have a $2,000 out-of-pocket maximum.
Please watch the video, spread the word, and press “like” or “follow us” if you wish, and take care.