The Donut Hole: What It Is and How Recent Legislation Will Affect Costs in 2024 and 2025
The Medicare Part D donut hole is a coverage gap where beneficiaries are responsible for paying a higher percentage of the cost of their prescription drugs. The donut hole begins after a beneficiary and their plan have spent a certain amount on covered drugs. In 2023, the donut hole begins after a beneficiary and their plan have spent $4,660 on covered drugs.
Recent legislation has made significant changes to the Medicare Part D donut hole. The Inflation Reduction Act of 2022 will eliminate the donut hole by 2025. In the meantime, the donut hole will shrink each year. In 2024, the donut hole will begin after a beneficiary and their plan have spent $5,030 on covered drugs.
How will these changes affect costs in 2024 and 2025?
The changes to the donut hole will have a positive impact on costs for many Medicare beneficiaries. In 2024, beneficiaries will pay less for their prescription drugs out of pocket than they would have without the changes. In 2025, when the donut hole is eliminated, beneficiaries will save even more money on their prescription drugs.
Here is a table summarizing the key changes to Medicare costs in 2024:
| Cost | 2023 | 2024 |
| Part B premium | $164.90 | $174.70 |
| Part B deductible | $226 | $240 |
| IRMAA surcharges | Vary | Vary (slightly higher) |
| Part D premium | $56.49 | $55.50 |
| Part D donut hole | $4,660 | $5,030 |
| Out-of-pocket costs | $7,400 | $7,050 |
What changes will begin in 2024?
The Inflation Reduction Act will bring three main categories of change for 2024: lower prescription drug costs, expanded access to preventive care, and financial assistance for low-income beneficiaries. The lower prescription drug cost element will result in a $35 per month cap on insulin, a $2,000 per year cap on out-of-pocket costs (slated to take full effect by 2025), negotiated drug prices, and limited price increases tied to inflation (also by 2025). The expanded access to preventive care will include benefits such as expanded cancer screenings and vaccinations.
The expanded financial assistance for low-income beneficiaries specifically focuses on those eligible for the Social Security program known as “extra help” or Low-Income Subsidy (LIS). In 2024, those who qualify for Extra Help/LIS will enjoy a $0 Medicare Drug Plan premium, $0 Drug Plan Deductible, and reduced copay amounts of $4.50 for generic medications and $11.20 for brand-name medications! Partial LIS will begin to be phased out as of 1/1/24, meaning the Full LIS Program will be available to all individuals with incomes up to 150% of the federal poverty level. As it stands in 2023, those who fall between 135% to 150% fall under the Partial LIS level.
Determining eligibility for LIS can be confusing, particularly regarding what is considered “resources.” Money in a checking, savings, or retirement account, as well as stocks and bonds, are considered resources. However, the home, one car, burial plots, and up to $1,500 set aside for burial expenses, furniture, and other household and personal items are currently not considered resources. In terms of income qualifications, individuals who generally qualify have an income of $21,870 and a resource limit of $16,600. For a married couple, the income threshold is $29,580 and the resource limit is $33,240. These figures are the updated amounts for 2024.
In addition to the federal LIS/Extra Help program, there are also many state programs available for those with higher incomes, which are continuing to expand their income qualifications. Medicare.gov offers a great tool for everyone to use and see what state programs are available: https://www.medicare.gov/plan-compare/#/pharmaceutical-assistance-program. For those interested in applying for LIS/Extra Help, apply at ssa.gov/extrahelp or call 1-800-772-1213 (TTY 1-800-633-4227). More information is available at Medicare.gov/extrahelp.
The Inflation Reduction Act: Impacts and Consumer Outlook
- Potential for Skyrocketing Part D Premiums:
One of the key impacts of the Inflation Reduction Act is the potential for skyrocketing Part D premiums. Under this legislation, drug manufacturers will be required to pay rebates to the government if prices for certain drugs increase faster than inflation. To offset the cost of these rebates, manufacturers may increase prices for other drugs. As a result, beneficiaries who rely on expensive medications may experience higher Part D premiums, posing a financial challenge for some consumers.
- Elimination of 5% Coinsurance Requirement:
In 2024, the Inflation Reduction Act will eliminate the 5% coinsurance requirement for catastrophic coverage. While this change may be seen as a positive development for beneficiaries, as it reduces out-of-pocket costs for those who require extensive drug coverage, the overall impact remains mixed. While it may lower prescription drug costs and expand access to preventive care, it is important to consider the potential trade-off of higher Part D premiums for some beneficiaries.
- Mixed Impact on Medicare Part D Costs:
The Inflation Reduction Act presents a mixed impact on Medicare Part D costs for beneficiaries. On one hand, the legislation aims to lower prescription drug costs and enhance access to preventive care, which can be beneficial for consumers. On the other hand, the potential increase in Part D premiums for certain beneficiaries may counterbalance these benefits. The full impact of the law is still being debated, and its long-term effects on consumer costs are yet to be fully understood.
- Consumer Outlook and Conclusion:
For consumers, the overall impact of the Inflation Reduction Act remains uncertain. While the legislation holds the potential to lower prescription drug costs and expand access to preventive care, the possibility of higher Part D premiums raises concerns. As the full impact of the law continues to be debated, it is crucial for consumers to stay informed and evaluate how these changes may affect their healthcare costs. Ultimately, the success of the Inflation Reduction Act in reducing inflation and benefiting consumers will depend on its implementation and ongoing evaluation.
Potential Ripple Effects.
While the decrease in out-of-pocket costs offers immediate relief, it’s crucial to understand the potential ripple effect this could have on the larger healthcare spectrum. One potential ramification is the dramatic surge in premiums for not only Part D Standalone Prescription Drug Plans (PDP) but also the $0 to low-cost Medicare Advantage Plans. This shift could drastically alter the landscape of affordable healthcare options for many.
Some carriers have even shared that the era of the $0 Medicare Advantage plan may be coming to an end. Although the exact implications of this legislation remain uncertain, the impact on these carriers could be significant, prompting a reevaluation of their pricing models. This could lead to a future where the $0 Medicare Advantage plan becomes but a fond memory in the annals of healthcare history.
It’s crucial to bear in mind that while beneficial to some, these changes could potentially increase financial strain for others. We must strive for a balance that allows for accessible and affordable healthcare without compromising the sustainability of the system. Let’s keep in mind the long-term effects and work towards a solution that benefits us all.
Impact on Stand-Alone Part D Plans and Medicare Advantage Plans
The wake of this legislation has seen several carriers start to implement drastic alterations in an effort to counteract the anticipated effects. A common concern among many beneficiaries is the perplexing $0 monthly premium associated with Medicare Advantage plans
A Medicare Advantage $0 Premium plan, as the name suggests, is a healthcare plan that requires no monthly premium from the beneficiary. This type of plan can exist due to the way Medicare Advantage is structured. Medicare pays a fixed amount to the companies offering Medicare Advantage Plans to cover a part of the cost. The rest of the costs can be covered by the insurance company through various means such as maintaining a network of providers, implementing cost-sharing methods with doctors and hospitals, and setting certain out-of-pocket costs for members. However, it’s important to note that low or zero premium does not necessarily mean zero cost. Other costs such as copayments, coinsurance, deductibles, and out-of-network fees may still apply. So, while the $0 premium can be very attractive, it’s essential to consider all potential healthcare costs when choosing a Medicare Advantage Plan.
In a surprising twist of events, certain carriers are making significant reductions to their Part D premiums for 2024, with some premiums dropping as low as $0.50 or even $0 in numerous states. The motivation behind this apparently counterintuitive move raises questions. One possible explanation, as suggested by some third-party marketing organizations, is that this strategy aims to attract a large number of enrollees. They speculate that, when prices skyrocket in 2025, many individuals will opt to stick with these plans, assuming that there are no better alternatives available. This scenario may indeed become a reality. On the other hand, some colleagues hypothesize that carriers are lowering premiums for undisclosed reasons, potentially aligning with pharmacy chains and negotiating deals with manufacturers. Time will soon reveal the truth as 2025 rapidly approaches.
The impact of this new legislation will not only shape the dynamics of the health insurance landscape but also profoundly affect individuals, particularly those with fixed incomes. As Medicare Advantage plan premiums potentially increase, seniors who heavily rely on these policies for their healthcare needs may face financial strain. This predicament could force them to make difficult decisions regarding their health, such as forgoing necessary treatments or medications due to exorbitant costs. Furthermore, the uncertainty surrounding these changes may lead to anxiety and stress, exacerbating existing health issues. It is crucial for carriers, consumers, and legislators to engage in open dialogue to ensure that affordable, high-quality healthcare remains accessible to all, regardless of income level.
How can Do It For Me Insurance help?
Do It For Me Insurance can help you compare and choose or keep the right Part D, Medicare supplement, and Medicare Advantage plan for your needs, doctors, prescriptions, and budget. We are a team of experienced and licensed insurance agents who are passionate about helping Medicare beneficiaries get the coverage they need at a price they can afford.
We offer a free, no-obligation consultation to help you:
- Understand your Medicare options
- Choose the right plan for your needs
- Enroll in your chosen plan
- Answer any questions you have along the way
Conclusion
The changes to the Medicare Part D donut hole are good news for beneficiaries. The donut hole will shrink each year until it is eliminated in 2025. This will save beneficiaries money on their prescription drugs.
If you are a Medicare beneficiary, it is important to review your coverage annually to make sure you have the right plan for your needs and to take advantage of any financial assistance programs that you may be eligible for.
To learn more about your Medicare options and get help choosing the right plan for you, contact Do It For Me Insurance Inc. today. We are here to help you make the most of your Medicare benefits.
Note: The information in the above sections is based on the hypothetical scenarios given and may not reflect the actual implications of any real legislation or act.