Joanne: Now that Labor Day is over and summer, sadly, is coming to an end, this also brings our summer break for the podcast to a close. Of course, this means we have to kick things off with the most exciting topic possible—Medicare Part D changes for 2025.

Cameron: But don't get too excited just yet. My name is Cameron Giardini, and together with my co-host, Joanne Giardini Russell, we run Giardini Medicare, an independent insurance agency based in Southeast Michigan. While we are based in Michigan, we work over the phone to directly help consumers in about 13 states find the right Medicare coverage for them. If we don't work in your state, we will connect you with another trusted independent agent who can help you find the right coverage. We also offer a free online course that you can register for by visiting gmedcourse.com.

To give you an overview of today’s episode, we will discuss some of the recent topics covered on our YouTube channel, which mostly involve the upcoming changes to the Medicare Part D prescription drug coverage landscape in 2025. Don’t worry; this episode won’t just repeat the same information from our previous videos. We’ll also bring you some updates that have come in since those videos were published.

We'll be talking about several topics today, including the 2025 Part D changes due to the Inflation Reduction Act that was passed back in 2022, some brand-new changes announced at the end of July—the Part D Stabilization Program—and finally, we’ll wrap up with our thoughts on what the 2025 Part D market will look like and what you should know and do. But first, Joanne will talk about the 2025 changes due to the Inflation Reduction Act.

Joanne: Right! As a reminder, the changes coming to the Medicare Part D plans in 2025 have been in the works since the passage of the Inflation Reduction Act back in the summer of 2022, which feels like a long time ago. This new law has caused changes to the Medicare Part D system every year since then. Some of these changes have already been implemented, such as the $35-a-month cap on Part D and Part B-covered insulins—you’ve probably heard about that. There are also $0 Part D vaccines; for example, think about shingles vaccines—what used to have a $200 co-pay now costs you nothing. These are changes that have already been implemented since the act was passed.

The beginning of drug price negotiations between the government and drug manufacturers has also started, along with other changes. But before we talk about the new changes coming in 2025, let's remind ourselves what Part D coverage is. In the simplest sense, Medicare Part D is a type of insurance that provides coverage for prescription medications that you likely fill on a regular basis at retail pharmacies. Part D plans are offered by private insurance companies.

Alright, with that being said, here are the important changes to the Part D market coming in 2025. Note that in this episode, we will only be discussing standalone Part D plans. We’ll have a separate episode in a couple of weeks highlighting how these changes will also impact your Medicare Advantage plans for next year.

Cameron: The first change we need to discuss for 2025 is one you might have already heard about the $2,000 cap on out-of-pocket Part D costs. It's important to remember that this cap on your out-of-pocket Part D prescription spending only applies to covered medications listed on your Part D plan’s formulary. It does not include monthly premiums or medications you fill without using your plan.

We’ve talked about formularies before, but in essence, they are long lists of medications covered by your specific Part D plan. If you get a medication that isn’t on the formulary or isn’t covered by your plan, it doesn’t count toward the cap. Also, if you choose to go outside your plan—think GoodRx or other sources like Mark Cuban’s Cost Plus Drugs—those will not count toward this $2,000 cap either.

This cap is significant because it is the first time we've seen a cap on Part D spending since we started in this industry about 10 years ago.

Change number two is closely related to the cap: the Medicare Prescription Payment Plan. You don’t need to remember the name, but it's something that has been put in place because even with the $2,000 cap, that amount can still be a lot of money to pay in a short period if it applies to you. This plan will be particularly helpful for people with more expensive medications. To help with this, the Inflation Reduction Act created the new voluntary Medicare Prescription Payment Plan, designed to help smooth out your Part D costs into more manageable monthly payments.

The easiest way to think about this is: if you have a very expensive medication that would cost you $2,000 at the beginning of the year in 2025, your insurance company could pay the pharmacy $2,000 upfront on your behalf, and you would pay your Part D insurance company in monthly installments of just under $167. So, you're essentially breaking up the $2,000 into smaller, more manageable monthly payments.

This program is set to begin on January 1, 2025. It’s good to know that this program is not only for those who will reach the $2,000 cap; it's actually available to all Medicare Part D enrollees, including those with Medicare Advantage plans. You can also enroll in this program regardless of your prescription costs. Whether your medication costs $500 or $50, you can choose to enroll. However, be aware that, depending on your costs, it might not always be as beneficial since it doesn’t lower your overall costs; it just spreads them out over time.

If you want to enroll in this program, you can do so beginning October 15, 2024, or at any time during 2025. However, if you think you'll benefit from it, enrolling sooner may be better.

We've already been asked by many people, "What happens if I want to leave the payment plan or if I simply don’t make the payments?" There are two ways to exit this payment program during the year: one, you can choose to leave the program voluntarily, or two, you could be involuntarily terminated if you don’t make payments within a two-month grace period.

It's important to note that although your Part D plan can terminate you from the payment plan itself, they cannot terminate your actual Part D coverage for non-payment of that payment plan. For example, if you fail to make those monthly payments of $167, you could be removed from the payment plan, but as long as you continue paying your monthly Part D premium, your Part D coverage will remain intact.

If you are terminated from the payment plan, you will have to pay the total cost for your medications the next time you go to the pharmacy. For instance, if your co-pay is $50, you would have to pay the full $50. You could continue paying the money owed to the plan in installments, or you could pay it as a lump sum, but the plan cannot require you to pay it all at once. Ultimately, your Part D plan can treat the non-payment as normal medical debt, which could potentially lead to collections. Whether or not this will happen remains to be seen.

Moving on from these two major changes to Part D coming in 2025, I'll let Joanne talk about the third change.

Joanne: This is my favorite one—there’s no more donut hole! When people ask, "What is the donut hole?" we can finally say, "Don’t worry about it." Whether you’re already enrolled in Part D coverage or are just researching your options, you’ve likely heard of the term "donut hole." It’s a coverage gap—a certain phase of coverage more commonly known as the donut hole. If you reached this phase in the past, it meant you would likely pay more out of pocket for your medications. The big news is that this phase will no longer exist in 2025, which is fantastic!

Cameron: That's something we never thought we would say, at least not for a long time.

Another significant change to the overall structure of Part D coverage is that there is now an increased financial liability for the insurance companies providing Part D coverage. This gets pretty technical, and we won’t get into all the details in this episode, but essentially, when you reach the final phase of drug coverage—the catastrophic phase—in 2025, Part D insurance companies will now be responsible for 60% of your medication costs for the remainder of the year. This is up from 20% in 2024.

This topic is complex, and we won't cover it in full detail in this episode but know that this change to insurance company risk will add uncertainty to their overall finances. And if there's one thing we know about insurance companies, it's that they don’t like uncertainty, and they definitely don’t like financial risk. We mention this because it's one of the factors likely to lead to increased Part D premiums to compensate for these changes. Just how much they will increase is still anyone’s guess, but we'll have more clarity in the coming months.

Joanne: After all these changes were made to the Part D coverage for 2025 due to the Inflation Reduction Act, it became pretty clear to agents like us and others in the industry that Part D plans, just as Cameron mentioned, would have to raise premiums to compensate for the added risk. The only thing we didn't know was just how much they would increase, and we still don’t know this.

Medicare started receiving 2025 Part D plan bids back in June, but evidently, the information they received from the plans made them realize that Part D premiums would be increasing more than they had initially expected. In response, on July 29, in addition to CMS (that’s Medicare) releasing their plan bid information for 2025, they also announced a new program to try to limit some of the Part D premium increases going into 2025. This new program is not something any of us brokers saw coming.

The technical term for this new program is the Premium Stabilization Demonstration Program. But the name isn’t what’s important—what matters is what this program means for your Part D coverage. Although this podcast episode is focused on standalone Part D changes and not Medicare Advantage plans, it is worth noting that this premium stabilization program applies only to Part D plans and not to Medicare Advantage.

There are three main points and proposed changes we’ll break down: one, a 15% reduction to the base beneficiary premium; two, a $35 cap on premium increases; and three, a narrowing of what we call risk corridors. Cameron will explain all three.

Cameron: Don’t worry. I’ll save you from all the nitty-gritty details, but there are definitely some important things you should know about this program.

Before I dive into the three changes, here are a few additional points: first, this program is voluntary, so insurance companies do not have to participate if they don’t want to. However, if they choose to participate, they must include all of their Part D plans. If they offer three different Part D plans under the same company, all three must be included. Additionally, if they choose not to participate in 2025, they won't be able to change their minds and join the program in 2026 or 2027, which is when the program is set to end for now.

The first change Joanne mentioned is the 15% per month reduction to the base beneficiary premium. That’s a lot of words, but the easiest way to understand it is: if a Part D plan chooses to participate in this program for 2025, it would receive a premium reduction from the federal government. For example, if they planned to offer a $50 per month policy in 2025, participating in the program would mean Medicare provides increased subsidies to lower that premium to $35 per month instead.

Speaking of $35 per month, that’s also the second change: the $35 per month premium increase limit. In other words, if a Part D plan participates in this program, they must agree not to increase their total 2025 premiums by more than $35 per month compared to their 2024 premiums. For example, if a plan currently costs $10 per month in 2024 and chooses to participate in the premium stabilization program, it cannot raise that plan’s premium to more than $45 per month in 2025. It can be lower, but it can’t go more than $35 per month higher than it was.

Finally, the third change is the narrowing of risk corridors. Risk corridors are a feature of Part D plans that you, as the consumer, will never really see or need to understand. But essentially, they help insurance companies limit financial risk if the cost to provide drug coverage to their members is higher than expected. In short, the government is going to limit Part D risk if insurers miscalculate the cost of providing coverage. This is all to help mitigate the risk imposed by the Inflation Reduction Act.

So, why would plans want to participate and willingly decrease the premiums they’re collecting? As always, it’s not out of the kindness of their hearts. Instead, it’s because the government will significantly increase funds and subsidies to Part D insurance companies that agree to participate. Essentially, this program allows plans to provide more competitive Part D offerings while simultaneously reducing their financial risk—a clear win-win for insurance companies.

Joanne: So, you’re probably wondering what our thoughts are and what you should do about all this. First and foremost, don’t stress about things you can’t control. Truly, please don’t stress. Part D plans are going to change coverage and premiums every year. Premiums will increase to whatever amount they’re going to increase to, no matter what.

Acknowledge that your plan will change and prepare to look at other options. This is crucial. Starting October 1, you can begin assessing the new plan year, as we've discussed in other episodes, on our YouTube channel, and on our TikToks. Remember, your Part D plan will send you an Annual Notice of Change by the end of September. This is very important, and we talk about it a lot—review your plan changes carefully.

Overall, we believe that many, if not most, Part D plans will take advantage of the Premium Stabilization Program. We expect Part D premiums not to increase as much as we had initially thought. We already believed that Part D premiums would not rise as dramatically as some others had suggested, but now we are even more confident in that assessment.

While we can't discuss any specifics we might know, we have already seen some Part D carriers announcing decreases in their Part D plans for 2025. So, it’s not all increases. We also feel that those of you on high-cost medications will certainly benefit from the overall Part D changes brought by the Inflation Reduction Act. Far too often, we’ve had clients with costly medications who pay $10,000 or more per year out of pocket. We’re excited about the positive impact these new programs will have on people in those situations.

Cameron: And, as always, don't forget to leave us a review on your podcast app and subscribe so you can listen to future episodes. You can also find more Medicare content from us by going to YouTube and searching for Giardini Medicare or by doing the same on TikTok. If you’d like to schedule a one-on-one phone call with one of our brokers, you can go to gmedicareteam.com. Finally, if you have any feedback or general questions, you can email us at info@gmedicareteam.com. Thanks, and have a great day!