Changes in 2025 include a new $2,000 out-of-pocket spending cap, elimination of the coverage gap phase, a higher share of drug costs paid by Part D plans in the catastrophic phase, along with a new manufacturer price discount and reduced liability for Medicare in this phase, and changes to plan costs and the manufacturer price discount in the initial coverage phase.
Out-of-pocket drug spending will be capped at $2,000
Beginning in 2025, Part D enrollees’ out-of-pocket drug costs will be capped at $2,000. This amount will be indexed to rise each year after 2025 at the rate of growth in per capita Part D costs. (This cap does not apply to out-of-pocket spending on Part B drugs.)
For Part D enrollees who take only brand-name drugs, annual out-of-pocket costs at the catastrophic threshold will fall from around $3,300 in 2024 to $2,000 in 2025 (Figure 3). In other words, Part D enrollees who take only brands and have drug costs high enough to reach the catastrophic threshold could see savings of about $1,300 in 2025 relative to what they will spend in 2024.
The coverage gap phase will be eliminated
The coverage gap phase, where Part D enrollees had faced 100% of their total drug costs under the original Part D benefit design and currently face 25% of costs for brand and generic drugs, will be eliminated in 2025. This means that Part D enrollees will no longer face a change in their cost sharing for a given drug when they move from the initial coverage phase to the coverage gap phase, which is the case in most Part D plans today, since most plans charge varying cost-sharing amounts, rather than the standard 25% coinsurance, in the initial coverage phase.
Part D plans and drug manufacturers will pay a larger share of costs for catastrophic coverage, and Medicare will pay a smaller share
Medicare’s share of total costs in the catastrophic phase (reinsurance) will decrease from 80% to 20% for brand-name drugs and from 80% to 40% for generic drugs beginning in 2025. This reduction will help address concerns about the substantial increase in Medicare’s reinsurance payments to Part D plans over time, which accounted for close to half (48%) of total Part D spending in 2022, up from 14% in 2006, based on data from the Medicare Trustees 2023 annual report. Medicare Part D plans’ share of costs will increase from 15% to 60% for both brands and generics above the cap, and drug manufacturers will be required to provide a 20% price discount on brand-name drugs (Figure 4)
Part D plans and manufacturers will face changes to their share of total drug costs paid in the initial coverage phase
Drug manufacturers will be required to provide a 10% discount on brand-name drugs in the initial coverage phase beginning in 2025, replacing the 70% price discount in the coverage gap phase under the current benefit design. Part D plans will pay 65% of brand-name drug costs.
If you have any questions or concerns please contact your Total Benefit Solutions, Inc Medicare health insurance specialist at (215)355-2121.