2025 Inflation Reduction Act: What Medicare

Part D Enrollees Need to Know About Insulin.

Are you concerned about the rising costs of insulin? 

The 2025 Inflation Reduction Act brings good news for Medicare Part D enrollees who rely on this life-saving medication. This landmark legislation significantly impacts drug pricing, potentially leading to substantial cost savings for millions of Americans managing chronic diseases like diabetes.

This article provides valuable information about the changes coming to Medicare Part D insulin coverage. We'll explore how the new law affects out-of-pocket costs, discuss the benefits for Medicare beneficiaries, and explain what these updates mean for your prescription drug benefits. Whether you use an insulin pump, insulin pen, or insulin injections, understanding these changes will help you make informed decisions about your healthcare and potentially reduce your medication costs.

Understanding the Inflation Reduction Act's Impact on Insulin Costs

The Inflation Reduction Act (IRA) brings significant changes to Medicare, particularly in how it affects insulin costs for beneficiaries. This landmark legislation aims to provide meaningful financial relief for millions of people with Medicare by improving access to affordable treatments and strengthening the Medicare Program ^[1].

Overview of the Inflation Reduction Act

The IRA introduces several vital provisions that directly impact insulin costs for Medicare beneficiaries. One of the most notable changes is the cap on out-of-pocket spending for insulin. This new law ensures that people with Medicare pay no more than $35 for a month's supply of each covered insulin product under Medicare prescription drug coverage, Traditional Medicare, or Medicare Advantage ^[2].

This cap on insulin costs is just one Part of a broader effort to lower prescription drug costs for Medicare beneficiaries. The IRA also redesigns the Medicare Part D prescription drug program, eliminating cost-sharing for prescription drugs in the catastrophic phase of the program starting in 2024. Additionally, it caps annual out-of-pocket prescription drug costs at $2,000 for 2025 ^[2].

Specific provisions for insulin coverage

The IRA introduces several specific provisions to make insulin more affordable for Medicare beneficiaries:

1. Medicare Part D Coverage: As of January 1, 2023, people enrolled in a Medicare Part D prescription drug plan (PDP) or a Medicare Advantage plan with prescription drug coverage (MA-PD) have no deductible for covered insulin products. They also have a monthly copayment cap of $35 for each covered insulin product ^[3].
2. Medicare Part B Coverage: Starting July 1, 2023, Medicare Part B beneficiaries or those enrolled in a Medicare Advantage plan who use an insulin pump furnished via durable medical equipment will no longer have to pay a deductible for insulin. They will also have a copayment cap of $35 per month's supply for their Part B-covered insulin ^{[3] [2]}.
3. Traditional Pump Users: People with Traditional Medicare who take insulin through a traditional pump will not pay more than $35 for a month's supply of insulin, and the deductible will not apply to the insulin ^[4].
4. Expanded Eligibility for Low-Income Subsidy (LIS): Effective January 1, 2024, the Part D LIS eligibility will expand. The IRA raises the income limit for certain people covered by Medicare for the entire LIS from 135 percent of the Federal Poverty Level (FPL) to 150 percent of FPL. This change will allow these enrollees to further reduce their out-of-pocket costs for insulin and other medications ^[3].

Timeline for implementation

The implementation of these changes follows a specific timeline:

1. January 1, 2023: The $35 cap on out-of-pocket costs for insulin under Medicare Part D went into effect. This applies to each insulin product covered by Medicare prescription drug plans and dispensed at a pharmacy or mail-order ^[2].
2. July 1, 2023: The $35 cap on out-of-pocket costs for insulin used with traditional pumps under Medicare Part B and Medicare Advantage coverage went into effect ^[2].
3. January 1, 2024: Expanding eligibility for the Part D Low-Income Subsidy (LIS) program will take effect, potentially reducing insulin costs for qualifying beneficiaries ^[3].
4. 2024 onwards: The calculation of the base beneficiary premium will be adjusted to limit increases to no more than 6% from the prior year ^[5].
5. 2025: Annual out-of-pocket prescription drug costs will be capped at $2,000 ^[2].

These changes represent a significant step towards making insulin more affordable for Medicare beneficiaries. By capping the monthly cost of insulin at $35 per covered product and implementing other cost-saving measures, the Inflation Reduction Act aims to alleviate the financial burden on those who rely on this essential medication. As these provisions are implemented over the next few years, you can expect substantial changes in how you access and pay for insulin under Medicare.

Changes to Medicare Part D Insulin Coverage in 2025

The year 2025 significantly changes Medicare Part D insulin coverage, offering substantial benefits to enrollees. These changes are part of the ongoing implementation of the Inflation Reduction Act, which aims to make insulin more affordable and accessible for Medicare beneficiaries.

New out-of-pocket cost cap

One of the most impactful changes coming in 2025 is the introduction of a new out-of-pocket cost cap for prescription drugs. Starting in 2025, your annual out-of-pocket costs for prescription drugs under Medicare Part D will be capped at $2,000 ^{[6] [5]}. This cap applies to all prescription drugs, including insulin, and significantly reduces potential expenses for many Medicare beneficiaries.

For insulin specifically, the $35 monthly cap on out-of-pocket costs implemented in 2023 will continue to apply. This means you'll pay no more than $35 for a one-month supply of each Part D-covered insulin product, even if you receive Extra Help to lower your prescription drug costs ^[7]. If you need a three-month supply, your expenses won't exceed $105 ($35 for each month's supply) ^[7].

Elimination of coverage gap phase

Another crucial change in 2025 is eliminating the coverage gap phase, known as the "donut hole." This modification simplifies the Part D benefit structure, resulting in a three-phase benefit:

1. Deductible phase
2. Initial coverage phase
3. Catastrophic phase

The initial coverage phase will now extend to the maximum annual out-of-pocket threshold, after which the catastrophic phase begins ^[8]. This change means you'll no longer face a sudden increase in your cost-sharing when moving from the initial coverage phase to what was previously the coverage gap phase ^[5].

Monthly payment options

Medicare Part D plans will offer a new payment option starting in 2025 to ease the financial burden of prescription drug costs. You'll have the choice to spread out your out-of-pocket prescription drug costs over the calendar year instead of paying the total amount at the pharmacy counter each time you fill a prescription ^{[9] [6]}.

This option allows you to pay your out-of-pocket monthly installments, which can be particularly beneficial if you have high prescription drug expenses ^[6]. By offering this flexibility, the new payment option aims to eliminate the burden of paying enormous out-of-pocket costs upfront, making it easier to manage your healthcare expenses throughout the year.

These changes to Medicare Part D insulin coverage in 2025 are expected to impact beneficiaries' out-of-pocket spending significantly. According to a report by the HHS Office of the Assistant Secretary for Planning and Evaluation, these improvements to the Part D primary benefit are projected to save people with Medicare an average of 30% in annual out-of-pocket prescription drug costs in 2025 ^[8]. This translates to a decrease of approximately $7.40 billion in out-of-pocket prescription drug spending for Medicare Part D beneficiaries in that year ^[8].

It's important to note that these changes apply to standalone Medicare prescription drug plans and Medicare Advantage plans with prescription drug coverage ^[6]. If you have a Medicare Supplement Insurance (Medigap) plan that covers your Part B coinsurance, it should also cover the $35 (or less) cost of insulin ^[7].

As you prepare for these changes, remember that they're designed to make your prescription medications, including insulin, more affordable and accessible. By capping out-of-pocket costs, eliminating the coverage gap, and offering flexible payment options, Medicare aims to provide you with more financial stability and peace of mind when managing your healthcare expenses.

Benefits for Medicare Part D Enrollees

Reduced financial burden

The Inflation Reduction Act brings significant financial relief to Medicare Part D enrollees. Starting in 2025, your annual out-of-pocket costs for prescription drugs will be capped at $2,000 ^[5]. This represents a substantial decrease from the previous system, where enrollees could face much higher expenses. For those who take only brand-name drugs, this change could result in savings of about $1,300 in 2025 compared to 2024 ^[5].

To further ease your financial burden, Medicare Part D plans will offer a new payment option beginning in 2025. You'll have the choice to spread out your out-of-pocket prescription drug costs over the calendar year instead of paying the total amount upfront each time you fill a prescription ^[10]. This flexibility allows you to manage your healthcare expenses more effectively throughout the year.

Another significant benefit is eliminating the 5% coinsurance requirement in the catastrophic phase, which takes effect in 2024 ^[5]. This change means you'll no longer have to pay a percentage of your drug costs once you reach the catastrophic coverage threshold, resulting in thousands of dollars in savings for those who use high-cost medications.

Improved access to insulin

One of the most impactful changes for many Medicare beneficiaries is the cap on insulin costs. As of January 1, 2023, your out-of-pocket expense for each insulin product covered under a Medicare prescription drug plan is limited to $35 for a month's supply ^{[11] [1]}. This applies to all Part D plans, and the Part D deductible doesn't apply to these covered insulin products ^[11].

This change is particularly significant considering that one in every three Medicare beneficiaries has diabetes, and over 3.3 million Medicare beneficiaries use one or more common forms of insulin ^[11]. By making insulin more affordable, this provision helps remove cost as a barrier to appropriate medical management of diabetes.

Potential health outcomes

The improvements in affordability and access to medications, especially insulin, have the potential to lead to better health outcomes for Medicare beneficiaries. For people with diabetes, consistent access to insulin is crucial for proper disease management. Gaps in access can increase the risk of serious complications, including vision loss, kidney failure, amputation, and heart attacks ^[11].

By reducing the financial burden and improving access to essential medications, these changes aim to help you maintain better control over your health conditions. The ability to afford and regularly take prescribed medications without financial stress can improve adherence to treatment plans and overall health outcomes.

Additionally, the expansion of the low-income subsidy program (LIS or "Extra Help") under Medicare Part D to 150% of the federal poverty level starting in 2024 ^[1] will provide further assistance to beneficiaries with limited resources. This expansion can help ensure more people have access to the medications they need, potentially leading to improved health outcomes for broader Medicare enrollees.

These benefits for Medicare Part D enrollees represent a significant step towards making healthcare more affordable and accessible. By reducing out-of-pocket costs, improving access to essential medications like insulin, and providing more flexible payment options, these changes aim to enhance your ability to manage your health effectively without the burden of excessive financial stress.

Conclusion

The Inflation Reduction Act significantly impacts Medicare Part D enrollees, particularly those who rely on insulin. By capping out-of-pocket costs and improving access to essential medications, this legislation aims to ease the financial burden on beneficiaries and potentially lead to better health outcomes. These changes represent a significant step towards making healthcare more affordable and accessible for millions of Americans managing chronic diseases like diabetes.

As these new provisions roll out over the next few years, Medicare beneficiaries must stay informed about how these changes affect their coverage and costs. To get more information or if you need help, give us a call or schedule an appointment with a broker. By understanding these updates, you can make informed decisions about your healthcare and potentially reduce your medication costs, ultimately improving your overall well-being and quality of life.

FAQs

1. What changes will occur in Medicare Part D by 2025?
   Starting in 2025, Medicare Part D will introduce an annual cap on out-of-pocket prescription drug expenses, limited to USD 2000.00. This cap will be adjusted annually based on inflation rates.
2. Does the Inflation Reduction Act include provisions for insulin costs?
   Yes, the Inflation Reduction Act sets a cap on out-of-pocket expenses for insulin at USD 35.00 per month for each insulin product covered under Medicare Part D plans. It also establishes similar caps for insulin under Part B and aims to reduce out-of-pocket drug costs in other aspects of Medicare.
3. How does the Inflation Reduction Act impact out-of-pocket costs for Medicare Part D enrollees?
   The Inflation Reduction Act ensures that starting from 2025, the annual out-of-pocket costs for individuals enrolled in Medicare Part D will not exceed USD 2000.00.
4. Is there a specific cap on insulin costs for Medicare Part D enrollees?
   Yes, under the Inflation Reduction Act, Medicare Part D plans must cover at least one of each dosage form and type of insulin product at a maximum of USD 35.00 per month. This pricing model was initially in effect from 2021 through 2023, with participation from less than half of all Part D plans each year.

References

[1] - https://www.cms.gov/inflation-reduction-act-and-medicare
[2] - https://www.cms.gov/newsroom/fact-sheets/anniversary-inflation-reduction-act-update-cms-implementation
[3] - https://www.aspe.hhs.gov/sites/default/files/documents/bd5568fa0e8a59c2225b2e0b93d5ae5b/aspe-insulin-affordibility-datapoint.pdf
[4] - https://www.cms.gov/files/document/10522-inflation-reduction-act-timeline.pdf
[5] - https://www.kff.org/medicare/issue-brief/changes-to-medicare-part-d-in-2024-and-2025-under-the-inflation-reduction-act-and-how-enrollees-will-benefit/
[6] - https://www.cms.gov/inflation-reduction-act-and-medicare/part-d-improvements
[7] - https://www.medicare.gov/about-us/prescription-drug-law
[8] - https://www.cms.gov/newsroom/fact-sheets/cms-releases-2025-medicare-part-d-bid-information-and-announces-premium-stabilization-demonstration
[9] - https://www.cms.gov/newsroom/press-releases/biden-harris-administration-releases-final-part-two-guidance-help-people-medicare-prescription-drug
[10] - https://www.americanprogress.org/article/project-2025-prescription-drug-plan-would-increase-costs-for-as-many-as-18-5-million-seniors-and-others-with-medicare/
[11] - https://www.cms.gov/priorities/innovation/innovation-models/part-d-savings-model

significantly impacts