Changes to Medicare Part D Coverage in 2024 & 2025
MN Health Staff Writer | April 3, 2024
The Inflation Reduction Act of 2022 includes changes to the Part D prescription drug costs for people with Medicare. The Act will include a number of changes to the Medicare Part D drug benefit. These changes include a cap on out-of-pocket drug spending for enrollees in Medicare Part D plans and requiring Part D plans and drug manufacturers to pay a greater share of costs for Part D enrollees with high drug costs. This explanation below provides an overview of the Part D benefit design as it is now in 2023 and changes coming in 2024 and 2025.
In 2023 and before, Part D Prescription Drug Coverage has three stages:
2023 Part D Coverage Stages
Stage 1: Initial Coverage
Insured pays deductible and co-pays until the total retail costs of their drugs equals $4,430 in annual cost
Stage 2: Coverage Gap or “Donut Hole”
Insured enters the coverage gap or "Donut Hole" until they reach their "true out of pocket" cost of $7,050
Costs in the coverage gap:
You pay 25% of generic cost
You pay 25% of brand-name drug cost
Stage 3: Catastrophic
Once the insured's annual true out-of-pocket costs reach $7,050, they pay:
Generics: Greater of $3.60 co-pay or 5% coinsurance
Brand Name: Greater of $8.95 co-pay or 5% coinsurance
In 2024, this structure of Part D coverages changed.
The 5% coinsurance during the catastrophic phase has been removed. Once the catastrophic phase has been reached, there is no more cost-sharing that the member is responsible for on covered prescriptions. The catastrophic limit in 2024 for true out-of-pocket costs is $8,000. This amount includes both what Part D enrollees spend out of pocket plus the value of the manufacturer price discount on brands in the coverage gap phase. This should lower the enrollees Part D out of pocket expense to about $3,300 out of their own pockets and will then face no additional costs for their covered medications. This amount could vary slightly based on what and how many Part D prescriptions one has.
2024 Part D Coverage Stages
Stage 1: Initial Coverage
Insured pays deductible and co-pays until the total retail costs of their drugs equals $5,030 in annual costs
Stage 2: Coverage Gap or “Donut Hole”
Insured enters the coverage gap or "Donut Hole" until they reach their "true out of pocket" cost of $8,000
Costs in the coverage gap:
You pay 25% of generics cost
You pay 25% of brand-name drug cost
Stage 3: Catastrophic
Once the insured's annual true out-of-pocket costs reach $8,000, they are done paying for covered Part D drugs.
0% Coinsurance
In 2025, this cap for out-of-pocket costs will decrease to $2,000 for covered prescription drugs. This will then be adjusted for the following years to reflect inflation.
Stage 2, the Coverage Gap or “Donut Hole Phase” will also be removed in 2025.
Another change starting on January 1st, 2025, is that Part D plans (stand-alone Part D plans and Medicare Advantage plans with prescription drug coverage) will have the option for members to break up their out-of-pocket prescription drug costs into monthly payment spread across the year. This program is not automatic but must be chosen to be set up.
2025 Part D Coverage Stages
Stage 1: Initial Coverage
Insured pays deductible and co-pays until they have paid $2,000 towards their covered Part D prescription drugs.
After hitting the $2,000 cap, the insured owes 0% towards their covered Part D prescriptions for the remainder of the year.
These Part D coverage changes will help individuals on expensive medications reduce their annual out of pocket costs.