As your trusted health insurance agent serving clients in both Arizona and California, it’s my honor to be able to guide you through all of life’s phases, and to consider “what’s new” in the coming year when it comes to healthcare coverage. I want to make sure you’re aware of some significant changes coming in 2025, thanks to the Inflation Reduction Act (IRA). 

Since open enrollment is quickly approaching, many of you have already reached out, concerned about some of the information included in your Annual Notice of Change you’ve received. Some of the notices detail increases in premiums and out-of-pocket costs, and even plan termination notices. I truly understand your concerns and confusion and  want to remind you that I am  here to help you understand your choices moving forward and of course make changes where needed.  

Let’s break down some of the changes, and how the Inflation Reduction Act may affect you.  

What is the Inflation Reduction Act? 

The Inflation Reduction Act (IRA) was signed into law on August 16, 2022 by President Biden, and includes many different provisions addressing climate change, tax reforms, deficit reduction, and most notably (at least to us), reforms aimed at reducing healthcare costs. 

According to the Secretary of Health and Human Services, Xavier Becerra, “As a result of this law, individuals purchasing Marketplace coverage are paying less in premiums, people with Medicare are benefiting from the $35 cap on insulin, and saving on free, recommended vaccines, and we are strengthening Medicare for the next generation. The Biden-Harris Administration is delivering lower prescription drug costs, making health insurance more affordable, and making the economy work for working families.”

How Does the Inflation Reduction Act Affect You?

Since its passage in 2022, incremental, yet significant, changes have already occurred as a result of the Inflation Reduction Act, and those changes will continue to roll out in 2025. 

There are many good aspects of the Inflation Reduction Act and it is definitely decreasing healthcare costs for millions of Medicare beneficiaries (as I’ll detail below), but with the good comes a bit of bad. The reality is that the decreased costs have to be absorbed somewhere, so carriers are getting creative.  In some areas carriers are exiting the stand alone Part D and are instead putting their focus into their Medicare Advantage Products (also known as Part C). I know changes can be scary, so again – if you’re concerned about what’s to come with your Medicare coverage, please get in touch with me so we can go through your options together.

Beyond the above, here’s a breakdown of how the Inflation Reduction Act could affect your Medicare Plan, especially if you’re enrolled in Part D.

1. Medicare Negotiation on Drug Prices

• What it is: One of the most impactful changes in the IRA is that it allows Medicare to negotiate prices for certain high-cost prescription drugs for the first time. The prices for ten different Medicare Part D drugs have already been negotiated, and 2025 will add another 15 to the list.
• Effect on Medicare Recipients: This could lead to significant reductions in out-of-pocket costs for Medicare beneficiaries, especially those who rely on expensive medications. Drugs selected for negotiation will likely see lower prices, making them more affordable.

2. Capping Out-of-Pocket Prescription Drug Costs

• What it is: Starting in 2025, the IRA caps out-of-pocket drug costs for Medicare Part D recipients at $2,000 annually. Once you hit the $2,000 threshold, you’ll no longer have to worry about managing the cost of your medications.
• Effect on Medicare Recipients: This cap directly benefits individuals who spend a lot on prescription medications, preventing them from facing unlimited drug costs, which can be financially burdensome, especially for those with chronic conditions.

3. Insulin Price Caps

• What it is: The IRA includes a provision to limit the cost of insulin to $35 per month for Medicare beneficiaries.
• Effect on Medicare Recipients: This is particularly beneficial for diabetic individuals who have struggled with the skyrocketing costs of insulin. The cap provides significant relief, ensuring more predictable and manageable expenses for this essential medication.

4. Free Vaccines for Medicare Recipients

• What it is: The IRA ensures that all vaccines recommended  by the Centers for Disease Control and Prevention (CDC) are available with no out-of-pocket costs for Medicare recipients. These savings have also been extended to most adults with coverage from Medicaid and CHIP.
• Effect on Medicare Recipients: Seniors can now access important vaccines, like those for shingles or the flu, without worrying about cost, leading to better preventive healthcare and potentially reducing serious illnesses among older adults.

5. Lower Premium Increases for Medicare Part D

• What it is: The IRA includes provisions that limit annual premium increases for Medicare Part D (the prescription drug plan) to no more than 6% per year from 2024 onwards.
• Effect on Medicare Recipients: This helps control premium costs, ensuring that seniors on fixed incomes are not hit with sudden, steep increases in their healthcare costs.

6. Expansion of Low-Income Subsidies

• What it is: The IRA expands eligibility for the Low-Income Subsidy Program (also known as “Extra Help”) under Medicare Part D to more beneficiaries.
• Effect on Medicare Recipients: More low-income seniors will qualify for assistance, further reducing their out-of-pocket costs for premiums, deductibles, and prescription drugs.

7. Penalties for Drug Companies Raising Prices Faster Than Inflation

• What it is: Drug manufacturers that raise prices for medications faster than the rate of inflation must pay rebates to Medicare. Rebates owed for quarters in 2023 and 2024 must be invoiced by September 30, 2025.
• Effect on Medicare Recipients: This provision discourages pharmaceutical companies from implementing excessive price hikes, which will help keep drug costs from rising rapidly for Medicare beneficiaries.  

More Info on The Medicare Prescription Payment Plan (M3P)

One of the most exciting provisions of the Inflation Reduction Act that will roll out this year is the Medicare Prescription Payment Plan (M3P) for those who remain enrolled in Medicare Part D. This new option can truly benefit members with high drug costs in the beginning of the year, as well as members who spend $2,000 in prescription drug costs annually.  Here are some FAQs about opting into this plan:

• Who should probably opt out of M3P? 

• • As mentioned, this plan looks to be beneficial for many Medicare beneficiaries, but may not entirely benefit others.  Candidates who may want to opt out of M3P include: 
    • Members with low drug costs
    • Members with the same drug costs every month
    • Members who join after September
    • Members who receive Extra Help – Medicare enrollees who are eligible for the Low-Income Subsidy (also known as Extra Help), enrollment in Extra Help is more advantageous.

• When can a member opt into M3P? 

• • New members cannot opt into the program until after their enrollment into their Prescription Drug Plan or Medicare Advantage Prescription Drug is approved and they receive their Welcome Kit and ID card.  Existing members can opt in anytime after October 15. 

• How can a member opt in M3P? 

• • Members can opt in over the phone, online via medicare.gov, or via the mail by completing and returning an election form. 

• What happens if a member doesn’t pay their M3P bill?

• • If a member misses a payment, they will get a reminder to make the payment, and there is a 60 day grace period. Ultimately, members who fail to pay will be removed from M3P by the date listed.  It’s important to note that members should always pay their monthly premiums first!

Get Ready for 2025 with LR-J

If you’re unsure how these updates will affect your coverage or want to explore new options, I can help you review your current plan and make any necessary adjustments. My goal is to ensure you’re prepared for these changes and fully understand the benefits available to you. I’m here to answer all your questions and provide advice to help you feel confident in your decisions when it comes to your healthcare coverage. 

The sooner we start, the more prepared you’ll be. Contact LR-J today to schedule a consultation, and let’s find the right health insurance plan for you and ensure you take advantage of all of the benefits offered by the implementation of the Inflation Reduction Act.