It’s that time of year when a storm developing in the Caribbean has the potential to become a hurricane. That’s when an early warning system becomes so important. This integrated system of hazard monitoring, forecasting and prediction, disaster risk assessment, communication and preparedness activities systems helps people get ready to take appropriate action, including evacuation, if necessary. A hurricane can be devastating for those in its path but it also has a significant impact on many others, including first responders, volunteers, and reconstruction workers.
IRA Impact Not All Positive
In the world of Medicare, the Inflation Reduction Act is making significant changes. The changes themselves are not adverse and, in fact, many Medicare beneficiaries welcome them. However, just as with a hurricane, these changes will affect many with Part D prescription drug coverage who do not benefit directly from them. We’ve already seen some of the early impact.
During last fall’s Open Enrollment Period, I reviewed 65 plans in three ZIP codes and identified the impact of two IRA initiatives.
1. Elimination of a coinsurance
As of January 1, 2024, the IRA eliminated the 5% coinsurance in Catastrophic Coverage. The approximately 1.5 million drug plan enrollees who reach the $8,000 threshold (out-of-pocket costs plus the value of discounts in the donut hole) will not pay an additional penny, essentially capping their costs at $3,300. The IRA did not change the cost of these drugs; it just changed who must cover those costs. As a result, drug plans face an additional $4.65 billion that beneficiaries do not have to pay now.
The adverse event: In response, almost a third of plans changed a copayment (a flat amount that never changes over the year) to a coinsurance (a percentage of the cost that can increase as drug costs rise).
The impact: A good example is Eliquis®, generally a Tier 3, preferred brand medication. For most of the plans I reviewed in 2023, the cost sharing was a $40-$47 copayment. However, this year, many of those plans now charge a coinsurance of 24%-27%. A drug’s list price serves as the basis for a plan’s retail price. According to the manufacturer, as of July 1, the list price for Eliquis was $594, increasing the cost sharing to $143-$162. And, if the price goes up, the cost sharing increases.
The early warning response: Most of those drug plan members who paid attention during the 2023 Open Enrollment were able to find a new plan that either still had copayments for Tier 3 drugs or a lower coinsurance than their current plan. One of my clients would have had a coinsurance on five drugs this year. By switching plans, she is going to save at least $500.
2. Premium stabilization
The IRA premium stabilization program also took effect January 1. The Centers for Medicare and Medicaid Services projected the total Part D premium to decrease by 1.8%. However, the total Part D premium is not the premium that drug plan members pay.
The adverse effect: Almost 60% of plans increased their monthly premiums, anywhere from 2%-84%, on average 16.5%.
The impact: In one California ZIP code, 2023 premiums ranged from $4.50-$69.10. This year, that range is $18.60-$116.
The early warning response: Almost 30% of our clients switched plans because their premiums were going up, anywhere from $200 to $1,400 this year. Their average savings in 2024 will be $505.
Note: My 2023 review was not a scientific study but rather a way to find out what changes drug plans were making in response to the IRA initiatives. If something happens to our clients, it will happen to others.
Pay Attention During the Open Enrollment Period
There is little doubt that the 2024 OEP will be the most important one in Medicare history. That’s because a $2,000 cap on Part D out-of-pocket drug costs takes effect January 1, 2025. The law isn’t making drugs free after the cap so who’s going to cover those costs? The repercussions of this year’s $3,300 cap should alert everyone to pay attention, whether getting Medicare drug coverage through a stand-alone plan or a Medicare Advantage plan.
It’s not too early to start planning for the OEP. Mark these dates on your calendar.
- Late September: Watch for your Annual Notice of Changes in late September and study it carefully.
- Mid-October: The OEP starts October 15. Use the Medicare Plan Finder to identify any changes in your plan’s coverage, restrictions, and costs. Then, compare that to other plans that are available.
- By end of November: If you find a better plan, enroll in it. You will be disenrolled from your current plan automatically. (Technically, the OEP ends December 7. But we have found that those who wait until the last minute invariably run into some complication.)
Between now and the end of the OEP, watch for more updated information. Time will tell whether the IRA changes will create a ripple or a tsunami. Whatever may happen, it’s up to you to become your own Medicare early warning system.