Medicare drug plans are improving, but not all are the same

When Pam McClure learned she would save nearly $4,000 on her prescription drugs next year, she said, “It sounded too good to be true.” She and her husband are retired and live with a “very strict “ Budget in central North Dakota.

By the end of this year, she will have spent nearly $6,000 on her medications, including a medication to control her diabetes.

McClure, 70, is one of about 3.2 million people with Medicare prescription drug coverage whose drug out-of-pocket costs will rise to $2,000 in 2025 as a result of the Biden administration’s Inflation Reduction Act of 2022, according to an Avalere/AARP study. Dollars will be limited.

“It’s wonderful – oh my God. We would actually be viable,” McClure says. “Maybe I can afford fresh fruit in the winter.”

The Inflation Reduction Act, a climate and health law, radically transformed Medicare’s drug benefit, called Part D, serving approximately 53 million people age 65 or older or with disabilities. The government estimates that about 18.7 million people will save about $7.4 billion next year because of the deductible cap and less publicized changes.

The annual enrollment period for Medicare beneficiaries to renew or switch drug coverage or select a Medicare Advantage plan is December 7.

Medicare Advantage is the commercial alternative to traditional government Medicare and covers medical care and often prescription drugs. Medicare’s stand-alone drug plans, which cover medications commonly taken at home, are also administered by private insurance companies.

“We always encourage beneficiaries to take a close look at plans and choose the best option for them,” says Chiquita Brooks-LaSure, director of the Centers for Medicare & Medicaid Services. “And this year it’s especially important to do that because the benefits have changed so much.”

The improvements to Medicare drug coverage required by the new law are the most sweeping changes since Congress added the benefit in 2003. However, most voters don’t know about it, KFF polls have shown. And some beneficiaries may be surprised by a downside: premium increases for some plans.

CMS says that nationwide, the average premium for Medicare drug plans will decrease by about $1.63 per month – about 4%. “People enrolled in a Medicare Part D plan will continue to receive stable premiums and have a wide choice of affordable Part D plans,” the agency says.

However, an analysis by KFF, a nonprofit health information organization that includes KFF Health News, found that “many insurers are increasing their premiums” and that major insurers, including UnitedHealthcare and Aetna, also reduced the number of plans they offer.

Many Part D insurers’ original premium proposals for 2025 were even higher. To cushion the price shock, the Biden administration launched a so-called demonstration program to pay insurers an additional $15 a month per beneficiary if they agree to limit premium increases to no more than $35.

“Without this demonstration, premium increases would certainly have been larger,” Juliette Cubanski, deputy director of the Medicare policy program at KFF, wrote in an Oct. 3 analysis.

Almost all Part D insurers agreed to the agreement. In California, for example, Wellcare’s popular Value Script plan rose from 40 cents per month to $17.40. The Value Script plan in New York went from $3.70 per month to $38.70, a more than tenfold increase – and exactly a $35 increase.

According to KFF Health News, premiums rose for at least 70% of drug plans offered in California, Texas and New York, and for about half of plans in Florida and Pennsylvania – the five states with the most Medicare beneficiaries.

In addition to the $2,000 drug spending cap, the Inflation Reduction Act limits Medicare out-of-pocket costs for most insulin products to no more than $35 per month and allows Medicare to negotiate prices for some of the most expensive drugs directly with pharmaceutical companies.

This also eliminates one of the most frustrating features of drug benefits, a loophole known as the “doughnut hole” that suspends coverage just when drug costs rise, forcing them to pay the plan’s full price for drugs out of pocket to pay You reach a spending threshold that changes from year to year.

The law also expands eligibility for “extra help” subsidies to approximately 17 million low-income people in Medicare drug plans and increases the amount of subsidies. Pharmaceutical companies must contribute to financing.

Starting January 1, the redesigned drug coverage will work more like other private insurance policies. Coverage begins after patients pay a deductible that will not exceed $590 for the next year. Some tariffs offer a lower or no deductible or exclude certain medications, usually inexpensive generics, from the deductible.

After beneficiaries spend $2,000 on deductibles and copays, the remaining Part D medications are free.

Because the new law increases the share of costs borne by insurers and pharmaceutical companies. The law also attempts to curb future drug price increases by limiting the increase in the consumer price inflation rate, which was 3.4% in 2023. If prices rise faster than inflation, drugmakers must pay Medicare the difference.

“Before the redesign, Part D incentivized drug price increases,” says Gina Upchurch, a pharmacist and executive director of Senior PharmAssist, a nonprofit in Durham, North Carolina, that advises Medicare beneficiaries. “The way it is designed now places more financial obligations on plans and manufacturers and puts pressure on them to help control prices.”

Another provision of the law allows beneficiaries to pay for medications in installments rather than having to pay a large bill over a short period of time. Insurers are expected to do the math and send policyholders a monthly bill that will be adjusted if medications are added or omitted.