The Inflation Reduction Act has increased the importance of this year’s Medicare Open Enrollment. Within this act, which encompasses various facets like deficit reduction, carbon emissions reduction, and investment in domestic energy production, lies a significant change scheduled for 2024: eliminating the 5% coinsurance in the Catastrophic Coverage drug payment stage; other changes are also on the changes.
Let’s simplify this for those who are confused:
- Individuals spending approximately $3,300 out-of-pocket on expensive brand-name drugs will reach the Catastrophic Coverage stage, the fourth payment stage within a Part D drug plan.
- Once this stage is reached in 2024, there will be no additional expenses for prescription drugs throughout the year.
- Roughly 1.5 million drug plan members without additional assistance can expect to save approximately $3,100 over the next year.
- However, this seemingly favorable change comes with a catch: Part D drug plans will absorb these costs, amounting to roughly $4.65 billion.
Implications For Medicare Enrollees
What implications will this have for the other 49 million individuals with drug coverage who won’t reach Catastrophic Coverage? Where will the difference come from? As the Medicare Plan Finder now includes 2024 plans, conducting a detailed analysis to uncover potential answers is now available. The objective is to identify changes and estimate their potential cost impact on drug plan members. The ultimate goal is to encourage every Medicare beneficiary to thoroughly review their drug coverage during this year’s Open Enrollment Period.
One of the key areas of focus is cost sharing, which involves the portion of costs covered by the insurance company and what is paid out of pocket after paying premiums and meeting deductibles. A review of copayments (a fixed amount) and coinsurance (a percentage of the drug’s retail cost) revealed the following observations:
# 1 Copayments are rising:
Four plans are increasing copayments for Tier 1 drugs by $1-$3, and 13 plans are raising Tier 2 copayments by $1-$9. These increases are relatively minor.
#2 Copayments transitioning to coinsurance:
In 2024, 21 plans (six in Fort Lauderdale, six in Los Angeles, and nine in Milwaukee) will make this transition, affecting nearly a third of the plans. For example, a $30 copay will become a 22% coinsurance in Fort Lauderdale, a $45 copay will transform into a 20% coinsurance in Los Angeles, and a $47 copay will shift to a 25% coinsurance in Milwaukee. This shift is expected to increase costs, especially for certain medications.
#3 Coinsurance increases for Tier 4 and Tier 5 drugs:
Approximately 25% of the plans reviewed are increasing coinsurance rates for Tier 4 drugs by 1%-8%, and four plans are raising Tier 5 coinsurance by 2%-5%. These drugs are among the most expensive, and these increases could result in higher monthly costs for plan members.
It’s worth noting that while some plans may decrease coinsurance for Tier 4 and Tier 5 drugs, they often offset these reductions with premium increases averaging 59%.
While the focus is primarily on Part D drug coverage, similar dynamics can apply to Medicare Advantage plans. To circle back to the crucial question: What do these changes mean for beneficiaries and their drug coverage? The answer is uncertain until individuals pay close attention during Open Enrollment. By doing so, they can explore alternative plans in their area and avoid potential surprises in January.