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The Inflation Reduction Act, enacted in 2022, has been phasing in various changes to Medicare Part D coverage. Some important changes took effect in 2024. Here’s where enrollees were 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. Starting in 2024, full Extra Help is available to enrollees with income up to 150% of the federal poverty level (FPL), as long as their assets are within the eligible range. This was an expansion of the benefit, as full Extra Help was previously only available up to 135% FPL, and those with income between 135% FPL and 150% FPL were only eligible for partial Extra Help.1
For 2024, the income limit for Extra Help eligibility in the continental U.S. is $22,590 for a single person or $30,660 for a married couple.2
In 2024, the asset limit is $17,220 for a single individual or $34,360 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, the eligibility expansion for full Extra Help was expected to make the program 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 enrollees no longer have to pay out-of-pocket costs for covered drugs once they reach the catastrophic coverage level. In 2024, this happens when the enrollee’s “out-of-pocket” costs reach $8,000. But because that number includes the value of the manufacturer discounts, an enrollee’s actual out-of-pocket costs at that point would be around $3,300.4
Before 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 2023,5 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 2019.6
Overall, the weighted average premium for a stand-alone Part D plan (PDP) is $43 in 2024.7 This is lower than the $48/month average that had been projected for 2024,8 likely because of plan changes made by consumers during the open enrollment period in the fall of 2023. For the last several years, the weighted average PDP premium was around $40/month,9 so average premiums did increase in 2024, but only by about 5%.
One of the provisions under the IRA that impacted Part D premiums starting in 2024 was the capping of Medicare Part D national base beneficiary premium (NBBP) that took 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 changed to include the cap set by the IRA.)
This cap on NBBP increases (6% higher for 2024 than 2023) was intended to lower Part D premiums, and in fact, the Part D NBBP for 2024 is a few dollars lower than it would otherwise have been. 10
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 although there is now a cap on the NBBP, enrollees should know that actual premium changes – increases or decreases – for a specific plan can still be much larger than 6%. So enrollees must compare all of the plan options that are available to them during open enrollment each fall.
(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 and future years 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.14 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.15 As of the third quarter of 2024, there are 64 prescription drugs covered under Medicare Part B that have reduced cost-sharing as a result of the IRA’s Inflation Rebate Program.16 For those drugs, the Medicare Part B coinsurance rate is lower than the 20% that normally applies to services covered under Part B. (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.)17
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. And the negotiated prices for those drugs were announced in August 2024.18 However, the negotiated prices won’t take effect until 2026.
In addition to those changes, several provisions of the IRA that reduced costs for many Part D plan buyers in 2023 continue to benefit Medicare Part D enrollees in 2024 and future years:
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 the coming year. 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 $545 in 2024 to $590 in 2025.)20
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 individual health insurance and Medicare since 2006. She has written dozens of opinions and educational pieces about Medicare for medicareresources.org. Her analysis is regularly cited by media who cover health reform and by other health insurance experts. The views expressed in this article are those of the author and may not reflect those of medicareresources.org, which is owned by Healthinsurance.org, LLC.
Footnotes
Under the new law, Medicare beneficiaries will see a series of prescription drug-pricing provisions phased in – mostly over the next several years
Our 2023 Medicare Open Enrollment Guide will walk you through sign-up dates, tips for choosing a plan, and more. Get the information you need today!
Under the new law, Medicare beneficiaries will see a series of prescription drug-pricing provisions phased in – mostly over the next several years
Our 2023 Medicare Open Enrollment Guide will walk you through sign-up dates, tips for choosing a plan, and more. Get the information you need today!
