The Inflation Reduction Act passed by Congress in 2022 is going to directly impact Medicare drug costs in the near future. This new legislation:

  • Allows the government to negotiate Medicare drug costs
  • Implements a $2,000 inflation-indexed cap on drug costs for each Medicare beneficiary
  • Improves coverage for certain vaccines
  • Expands and makes permanent the insulin savings program
  • Requires drug companies to pay rebates when drug cost increases exceed the rate of inflation.

This is excellent news for anyone who relies on Medicare for their healthcare coverage, but it can be confusing to understand how this new legislation may directly impact your costs. While all of these new measures are important, we feel that the Medicare Drug Cost Cap is the most impactful.

Although we are all being impacted by inflation, seniors and persons with disabilities have a distinct disadvantage due to soaring Medicare drug costs and the lack of a yearly Medicare drug cost cap – this new legislation aims to change that.

What Is The Overall Impact of the Medicare Drug Cost Cap?

Perhaps one of the most impactful pieces of this new legislation is the implementation of a yearly Medicare drug cost cap for each Medicare beneficiary.

The cap will place a $2,000 limit on beneficiary out-of-pocket costs for prescription drugs in a calendar year under Medicare Part D, whether a stand-alone drug plan or a drug plan that is part of a Medicare Advantage program.

Since the introduction of Medicare Part D in 2006, Medicare beneficiaries have never benefited from a maximum out-of-pocket limit on their prescription medication costs.

Under the Medicare program, the majority of prescription drug costs are in addition to any medical expenses and while there are cost containment measures in place there is currently no true out-of-pocket maximum.

Original Medicare (Parts A & B) only cover certain medications for specific situations – a beneficiary must enroll in a Medicare Part D plan to have prescription drug coverage.

The current standard model for Medicare Part D coverage has 4 phases:

  1. Deductible
  2. Initial Coverage
  3. Coverage Gap = “Donut Hole”
  4. Catastrophic

Notice that there is no phase for “out of pocket maximum” which indicates that an insured has met their portion of the out-of-pocket costs and is now 100% covered for eligible Medicare drug costs.

Is The 2022 Medicare Drug Cost Update Cause For Concern?

How is this different from other kinds of health insurance?

Since March 2010, consumers began benefitting from drastic changes made to health insurance due to the passage of the Affordable Care Act (sometimes referred to as ACA, PPACA, or Obamacare). One of the major changes was the implementation of a true maximum out-of-pocket limit, sometimes referred to as “MOOP”.

Before the Affordable Care Act, consumer out-of-pocket costs like office visit copays or prescription drug copays were always in addition to the plan deductible and out-of-pocket maximum (except for HSA-eligible plans).

For over a decade, we have all benefited from receiving credit for all eligible out-of-pocket costs towards our health insurance policy’s annual out-of-pocket maximum, except for persons on Medicare.

When Will the New Medicare Drug Cost Cap Go Into Effect?

The 2022 Medicare drug cost cap won’t take effect until 2025. However many of the other measures will begin taking effect like Medicare drug cost negotiations, expansion of the insulin savings programs, and better vaccine coverage under Medicare Part D,

In 2024, the 5% coinsurance clause during the Catastrophic phase of Medicare Part D will be eliminated.

Ways to Obtain Medicare Prescription Drug Coverage:

Original Medicare + Medicare Part D

Original Medicare is comprised of two parts: Hospital Part A and Medical Part B. Original Medicare in general does not cover prescription medications. You can receive prescription drug coverage by enrolling in a Medicare Part D plan.

Even though these plans are called Medicare Part D, they are administered by private insurance companies. Medicare Part D plans can be a stand-alone Prescription Drug Plan (PDP) or part of a Medicare Advantage plan.

If you have limited income and resources, you may qualify for Extra Help through a Federal program called Low Income Subsidy (LIS) or Extra Help. This program helps specifically with Medicare drug costs. You can apply online or call Social Security Administration to apply over the phone at 1-800-772-1213.

Medicare Advantage Plan

A Medicare Advantage Plan (MAPD) provides all of the services that Original Medicare does plus additional benefits such as vision care, dental care, and wellness programs at little or no added cost compared to the Original plan. Many Medicare Advantage plans include Medicare Part D coverage.

Medicare Part D Drug Costs Are About To Get A Lot More Complicated

Medicare Part D Drug Costs Are About To Get Little More Complicated.

The Centers for Medicare & Medicaid Services (CMS) has announced that the program will start capping yearly drug costs for each beneficiary at $2,000—except it will not become effective until 2025. In the meantime, the best way to control your Medicare drug costs is by finding a Medicare Part D plan that is cost-effective and seeing if you may qualify for Extra Help.

For more information about the 2022 Medicare drug cost update, consult with the professionals at Smart Insurance Solutions® — a local independent insurance agency serving Nebraska and Iowa.