It might not reduce inflation much, but the new Inflation Reduction Act will be bringing some significant Medicare Changes in 2023. Read more in this blog to find out how the Medicare changes may affect you.
Medicare Changes 2023
Here’s a brief rundown of the IRA’s most important provisions affecting Medicare, including Medigap and Medicare Advantage plans:
Medicare Part D Premium Price Controls
The IRA limits Medicare Part D price increases to not more than 6% per year.
5% “Catastrophic Threshold Cost Sharing Requirement” Eliminated
Prior to the passage of the Inflation Reduction Act, there was no cap on the amounts Medicare beneficiaries pay for prescription drugs.
There is currently a catastrophic threshold of $7,050, after which Part D coinsurance is limited to 5% of costs. But for cancer patients and those taking high-cost drugs, even that 5% coinsurance can generate crippling costs – or force Medicare beneficiaries to go without lifesaving prescription medications due to cost.
Most Medicare beneficiaries with significant out-of-pocket drug expenses can get at least some help from manufacturer discounts (especially during the “coverage gap” phase, or “donut hole”). Some may also get help from state pharmaceutical assistance. All of which count towards the $7,050 catastrophic threshold.
Most beneficiaries who hit the catastrophic threshold still wind up paying about $3,000 out of their own pockets.
This meant a few people with very high-cost drugs had to pay tens of thousands of dollars per year out of their own pocket, even with a Part D plan.
Effective 2024, the Inflation Reduction Act will eliminate the coinsurance requirement after Medicare Part D beneficiaries reach the catastrophic threshold – which officials project to be about $7,775 by the time the measure takes effect.
That means you no longer face a 5% coinsurance requirement after hitting the catastrophic threshold. Instead, you have no further coinsurance. You may still have a copay. But your Part D plan will pick up 100% of the cost of prescription drugs.
Given the additional assistance from manufacturer discounts and the additional assistance from state programs, the law’s advocates expect that most Part D beneficiary’s out-of-pocket expenses will be capped at around $3,250 for prescription drugs, as of 2024, when the Inflation Reduction Act provisions take effect.
$2,000 Max Out-of-Pocket Drug Cost Cap Starting in 2025
In 2025, the Inflation Reduction Act will lower that out-of-pocket cap even more, with a new simplified pricing scheme that sets individual beneficiary spending limits at $2,000 per year.
Insulin Price Caps
Starting in 2023, The Inflation Reduction Act caps the cost of insulin for Medicare beneficiaries at $35 per month. Some Part D plans already have this provision. The IRA expands it to all Medicare beneficiaries.
In all, approximately 3.3 million Medicare Part D enrollees used insulin as of 2020, according to the Kaiser Family Foundation.
The insulin price caps only affect prices paid by Medicare beneficiaries. The Inflation Reduction Act does nothing to improve insulin access for the uninsured.
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Medicare Changes 2023: Spreading the Cost Out
The IRA also creates a mechanism to allow beneficiaries with high drug costs to spread their out-of-pocket expenses out over the course of the year.
Presently, many people with high drug costs are hit with a massive cost shock concentrated in January and February – forcing many to choose between their rent or mortgage, heating costs, or medication.
The IRA will allow you to make smaller payments spread out all year long – a much more budget-friendly approach to forcing Part D beneficiaries to pay the whole cost-sharing requirement in the first part of the year.
Vaccines Will Be Free
The Inflation Reduction Act makes recommended vaccinations free for beneficiaries, starting in 2023. This would impact some 4.1 million Medicare beneficiaries each year. That’s how many got a covered vaccine last year.
And it wasn’t just COVID vaccines. 3.6 million Medicare beneficiaries received the shingles vaccination last year.
Medicare Drug Negotiation
The law allows the federal government to leverage its massive purchasing power to negotiate drug prices with manufacturers – beginning in 2026.
Medicare will start by negotiating the price for only 10 commonly prescribed Part D drugs. But they will be adding
more and more to the negotiated list every year through 2029.
Low-Income Part D Subsidies Expanded
The Inflation Reduction Act expands the full Medicare Part D low-income subsidy (LIS) assistance to those making up to 150% of the federal poverty line.
Currently, the subsidy phases out for those making between 135% and 150% of the federal poverty level.
Those receiving full LIS benefits pay no Part D premium or deductible and only modest copayments for prescription drugs. When they reach the catastrophic spending threshold, there is no cost sharing for these people.
Drug Prices Capped at Rate of Inflation
Requiring drug companies to pay rebates if drug prices rise faster than inflation, starting in 2023.
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Medicare Changes 2023: Conclusion
Some of these measures are long overdue.
However, other measures, like setting an artificial cap on plan premium increases over several years, are a proven recipe for shortages. Premiums must reflect the real cost of doing business, or no insurance company will stay in the market.
If inflation continues to exceed 6%, as it has been most of this year, plans will either roll back benefits, or pull out of the market altogether.
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Mike Montes is a Personal Benefits Manager at MediGap Advisors. Mike has a passion for bringing clarity to those confused about Medicare. He is an authority on Medicare, Medicare supplement plans, Medicare Advantage plans, and Part D prescription drug plans. Read more about Mike on his Bio page.