Effects of the 2025 Medicare Drug Cap
All Medicare Part D prescription drug plans will have a $2,000 out of pocket max in 2025. This includes the Part D benefit in Medcare Advantage plans. The cap will benefit the roughly 9% of people on Part D plans that take name brand drugs. Their co-pays will be capped at 2K for the year. The effects of the 2025 Medicare drug cap on stand-alone Part D and Medicare Advantage plans will be positive for some but may have negatives for the majority.
How the 2025 $2000 Medicare drug cap will be implemented
The change is fairly simple. Drug plans will continue to have a deductible phase like they do currently. After that phase will be the copay phase. The “Donut Hole” will be gone, and the member will be limited to $2,000 out of pocket max. The catastrophic phase will already have no cost share in 2024 and not be part of the Part D lingo by 2025. Pretty straight forward.
Benefits of the $2,000 cap
As agents, we have all likely run medications for clients on Connecture, Sunfire or a carrier portal that have yielded some terrible looking results. $3,000, $4,000, $5,000 out of pocket results and higher. The 2025 $2,000 Medicare drug cap will certainly benefit these people which is roughly 9% of the population and that percentage is increasing. How can the use of expensive name brand drugs not increase when we have so many commercials with fancy jingles these days? Besides losing a few pounds it is impossible to get the Ozempic song out of your head OH, OH, OZEMPIC Everyone is dancing and having fun when they take Jardiance (Time to sing and dance with Jardiance) so why not get in on the fun?
Unintended negative consequences
While the cap is good for roughly 9% of Medicare drug plan enrollees it will have some negative impacts on everyone else. The first will be on the premiums of stand-alone drug plans. Insurance companies are taking on a great deal of additional cost with the cap. It is estimated Part D plans costs will be nearly 45% higher once members hit the cap. To compensate for this there will certainly be substantial increases in part D premiums. CMS is limiting carriers’ ability to raise Part D premiums in 2025 and beyond by 6% a year. That is only on the base premium however and not on the supplemental component of the rate in drug plans. Is it not far-fetched to imagine average Part D drug plan premiums of $120 – $140 per month by 2026.
Medicare Advantage plan trouble
The other negative of the $2,000 drug cap in 2025 will be the impact on Medicare Advantage plans. The insurance companies will have substantially higher costs on the drug portion of the plans in 2025. The most obvious place for them to make up for this additional cost is by adding premiums to plans, increasing copays on medical services and reducing extra benefits such as dental, vison, OTC, Flex cards and any other crazy extras out there today. Does this mean we can say goodbye to $0 premium plans? Hard to say but maybe. How much will they reduce extra benefits? Will they start paying commissions below the CMS Max allowable? Keep in mind, carriers do not have to pay at the max. They can pay any level below it they think the agent and broker community will tolerate.