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The Medicare open enrollment period (also known as the Medicare Annual Election Period) is underway, now through Dec. 7. It’s an annual opportunity to make changes to your Medicare Part D prescription drug coverage.
This year, especially, Medicare Part D enrollees should pay particularly close attention to changes in 2024 prescription drug coverage costs resulting from provisions of the Inflation Reduction Act (IRA) passed by Congress in 2022. Here’s where enrollees are most likely to see their costs affected by the IRA:
Medicare’s Extra Help program (also known as the Low-Income Subsidy) provides financial assistance that can make prescription drugs and Medicare Part D prescription drug (Part D) premiums more affordable for policyholders. Depending on their income and assets, a Part D plan buyer may be eligible for either partial or full Extra Help. (The income limits are currently 135% of the poverty level for full Extra Help, and 150% for partial Extra Help.)1
Starting in 2024, full Extra Help will be available to enrollees with income up to 150% of the poverty level, as long as their assets are within the eligible range. In 2023, the asset limit is $16,660 for a single individual and $33,240 for a married couple; these limits are indexed each year. Some assets are not counted, such as your primary home and your vehicles.2
According to the U.S. Department of Health and Human Services, this could make full Extra Help newly available to 300,000 low-income Medicare beneficiaries.3
Know someone who might be eligible for Extra Help? The Social Security Administration has information about applying for this benefit.
Learn more about Extra Help.
Under the IRA’s provisions, 2024 Medicare Part D plan buyers will no longer have to pay out-of-pocket costs for covered drugs once they reach the catastrophic coverage level (when the policyholder’s out-of-pocket spending reaches $7,400).
Prior to 2024, a Part D enrollee would pay 5% of the cost of covered drugs once they reached the catastrophic coverage level (or copays of $4.15 for generics and $10.35 for brand-name drugs in 2023,4 in situations where those amounts are more than 5% of the cost of the drug).
About 1.5 million Medicare Part D enrollees had prescription drug costs that put them above the catastrophic coverage level in 2019.5
One of the provisions under the IRA that is impacting Part D premiums is the capping of Medicare Part D national base beneficiary premium (NBBP) that takes effect in 2024. (The NBBP is calculated by the federal government, based on bids submitted by plans and a formula that’s set in statute; starting with the 2024 plan year, that formula has changed to include the cap set by the IRA.)
But while consumers may expect the IRA’s cap to limit how much their Part D premiums increase for 2024, it’s more complicated than that:
So while premiums will be lower thanks to the cap on the NBBP, enrollees should know that premium changes – increases or decreases – for a specific plan can still be much larger than 6%, and it’s crucial for enrollees to compare all of the plan options that are available to them for 2024.
(It’s also important to note that the Part D late enrollment penalty is based on the national base beneficiary premium. So the cap on the base beneficiary premium means that people who pay a Part D late enrollment penalty will pay a slightly smaller penalty in 2024 than they would have paid without that cap.)
In addition to addressing out-of-pocket costs and premiums for Medicare Part D, the IRA also included provisions to address the amount that beneficiaries, the government, and insurers pay for prescription drugs covered by Medicare Part D and Part B.
Medicare Prescription Drug Inflation Rebate Program
Since the start of 2023, the IRA has been requiring prescription drug manufacturers to pay rebates to Medicare if the price of their drugs increases faster than inflation.10 The Department of Health and Human Services will start to send rebate invoices to drug manufacturers in 2025.
And, since April 2023, Medicare Part B enrollees who use certain medications may have seen reduced cost-sharing/coinsurance for drugs whose prices have increased faster than inflation.11 Thirty-four prescription drugs covered under Medicare Part B now have reduced cost-sharing as a result of the IRA’s Inflation Rebate Program. For those drugs, the Medicare Part B coinsurance is 20% of the inflation-adjusted payment amount, so it’s lower than the normal coinsurance amount. (Part B-covered drugs are certain drugs that are administered in a medical office by infusion or injection; most drugs are covered under Part D instead, and are not affected by this program.)12
Medicare drug price negotiation
The IRA now allows Medicare to negotiate with drug manufacturers on prescription drug pricing. In August 2023, the federal government published a list of the first ten drugs that are subject to these price negotiations.
But this will be a long process – the negotiated prices won’t take effect until 2026. And that’s assuming the negotiation isn’t derailed or slowed by the lawsuits that have been filed by drug manufacturers and advocacy organizations.
In addition to those changes, several provisions of the IRA that reduced costs for many Part D plan buyers in 2023 will continue for 2024 coverage:
Medicare’s open enrollment period runs from October 15 to December 7. If you’re enrolled in Medicare, this is your opportunity to make a change to your Part D coverage, either under a stand-alone Part D plan (PDP) or a Medicare Advantage plan that includes Part D coverage (MA-PD).
Even if you’re happy with your current drug coverage, it’s worth your while to compare the available options for 2024. Make sure you know how much your premium will be changing in January and whether your plan will make changes to its cost-sharing or deductibles. (For example, the deductible for standard plans is increasing from $505 in 2023 to $545 in 2024.)14
You’ll also want to understand what your costs might be under the other plans that are available in your area.
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about Medicare for medicareresources.org since 2013. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.Footnotes