Part D Donut Hole Eliminated in 2025

Attention Medicare beneficiaries! If you've ever filled a prescription, you've probably encountered the notorious 'donut hole.' Dive into its intriguing evolution and get the inside scoop!

Part D coverage launched in 2006 has a phase dubbed the Coverage Gap, or ‘donut hole,’ where folks had to cover the full cost of their meds themselves. Insurers wouldn’t chip in, which led to some people, unable to afford the costs, stopping their medication.

Starting in 2012, if you reached the donut hole, you received drug discounts. Brand-name drugs had a 50% discount and generics a 14% discount.

Each year, discounts rose slowly until the donut hole was fully eliminated in 2020. This didn't make medications costless; it simply equalized the cost responsibility at 25% of the drug’s price, identical to the Initial Coverage phase. For some, this meant paying amounts like $3,500, $4,000, or higher when in the donut hole.

The Inflation Reduction Act is set to ease the financial burden on people by reducing medication costs. Starting January 1, 2024, patients will no longer need to pay the previous 5% coinsurance once they reach the Catastrophic Coverage phase, keeping their spending on drugs between $3,300 and $3,500. This eliminates the risk of unlimited drug expenses. Even better, as of January 2025, anyone with Part D coverage will only spend up to $2,000 per year on prescriptions. With this significant change just around the corner, now's the perfect time to learn about the upcoming Part D cap.

Facts Too Know About Medicare Part D 2025

The cap will be applied for you; no action is needed on your part. This is beneficial because, as KFF reports, three-quarters of older adults either don't know or are unsure about the existence of a law that limits the prices of medications.

People with Part D coverage won't pay more than the set maximum cost. This insurance can come from either an independent Part D policy or from Part D benefits included in other plans, like Medicare Advantage or the Federal Employee Health Benefits (FEHB) program.

The cap will only affect medications that are covered by a plan's approved drug formulary. To sum up, all drugs must get the FDA's okay and the Social Security Act must not ban them. Plans have to include all meds in six key categories: those for immune system suppression, HIV, depression, psychotic disorders, epilepsy, and cancer, plus two types from all other groups. If a drug isn't included, the person pays the full store price.

The cap doesn't cover drugs under Part B. These medications come with a doctor's services or are for use with long-lasting medical devices and are usually not taken by oneself.

A separate program under the IRA aims to cut down the cost of Part B drugs. If a Part B drug's price rises more quickly than inflation, the Inflation Rebate Program steps in to reduce its cost. As per the Health and Human Services, daily savings for some users range from $1 to $4593, varying by their coverage type.

The cap initially is $2,000, and it'll increase each year with inflation.

This initiative has given rise to a new program, the Medicare Prescription Payment Plan. If you spend up to the limit, expect a $2,000 charge in the first or second month. Think of this like a payment plan where you spread your bill payments over time. The Centers for Medicare and Medicaid Services are finalizing who'll be eligible. When confirmed, every Part D and Medicare Advantage plan with Part D must let qualified members pay their medication costs monthly.

The payment plan is voluntary and requires enrollment. Eligible individuals will receive information from their drug insurers soon.

The gap in donut has disappeared. The new $2,000 cap introduces three stages for Part D medication payments.

The deductible: In 2025, the cost will be $590. Depending on the plan, you could pay anywhere from $0 up to this amount.

Initial Coverage: Members in a drug plan pay for a quarter of their medication prices. The plan usually requires a copayment or coinsurance until the member spends $2,000.

Catastrophic Coverage: Once you hit the cap, you won't pay anything more for the year.

So Good That it is Hard to Believe...

A study by KFF found that capping Medicare Part D expenses at $2,000 could lower medication costs for over a million people. Nevertheless, many may end up paying more due to recent changes like removing the 5% payment in Catastrophic Coverage. Drug plans now cover more costs, leading to shifts from fixed copayments to variable coinsurance and higher premiums. With the cap in effect, plans might also limit drug options or exclude expensive ones. More details will surface this fall with the release of 2025 plan information.

Please pay attention to your drug coverage during the Annual Enrollment Period, October 15 to December 7. It is estimated that over 70% of all Medicare member may need to make a change in their plan, mainly due to the new Part D changes.