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Medicare donut hole 2025

There are some big changes coming to Medicare Part D (PDP) plans.  This includes the discontinuation of the Medicare donut hole 2025.  In January 2024, CMS released a draft of the Medicare Part D payment policies.

Starting next year, see what changes are being made to Part D (prescription drug) coverage.

The new design for prescription coverage will consist of three phases of coverage.

1. The first phase will be the “Annual Deductible Phase”.  In this phase the enrollee pays 100% of their prescription drug cost until they meet the deductible of $590.
2. The second phase is the initial coverage or “Standard Coverage Phase”.  This phase is the former initial coverage phase merged with the Donut Hole/Gap phase. During this phase.  Once the enrollee meets the spending threshold(OOP) of $2,000 for CY 2025, they complete this phase of overage and move into the catastrophic phase.
3. The third phase is the catastrophic phase. During this phase of coverage, the enrollee pays no cost sharing for covered Part D drugs.

As you can see, there is no donut hole (coverage gap) phase.  It is merged with the “Standard Coverage Phase”.

Find out about the 2025 Medicare Drug cap

The changes in payment liability

This new plan design includes changes in payment liability of enrollees, plan sponsors, drug manufacturers and CMS.

1. As stated above, in the first phase “Annual Deductible Phase”, the enrollee must pay 100% of the cost for prescription drugs until the deductible amount is met.
2. In the second phase initial coverage “Standard Coverage Phase” enrollees pay 25% coinsurance for covered drugs while the plan sponsor typically pays 65% for  applicable drugs and 75% for all other covered Part D drugs.  Manufacturers usually pay 10% of the cost through the discount program.
3. The third phase “Catastrophic Phase”, enrollees do not pay a cost share for covered Part D drugs.  Drug plan sponsors normally pay 60% of the cost on covered drugs.  Manufacturers pay a discount of about 20% and CMS pays a subsidy equal to 20% of the cost for applicable drugs.  CMS pays about 40% of drug costs for some other Part D drugs.

Click here to learn more about PDP plans

Key points

1. Removal of the Donut Hole/Gap phase – Merging together with the former initial coverage phase now the “Standard Coverage Phase”.
2. There are now only 3 coverage phases: Deductible, Standard & Catastrophic.
3.  The Out of Pocket (OOP) threshold is dropping to $2,000 annually.
4. The end of the Donut Hole/Gap discount program (CGDP) and the start of the Manufacturer Discount Program (Discount Program)changes what drugs get discounts and how they count towards the OOP.  This also changes who is responsible for the cost beyond a set amount.

Watch a YouTube video on Medicare Part D changes

The drug plans will pay similar amounts as in previous years, although a larger part of their responsibility starts much earlier than in previous years.  In other words, drug plans will pay more money on more enrollees overall.

Click here to learn all the details of the Medicare Part D redesign

It is expected that the added costs drug companies incur may result in either higher Part D plan premiums or possibly spread across other MAPD plan costs.

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Wellcare prescription plans

Because the ability to access affordable prescription medications is crucial to maintaining good health, beneficiaries must be aware of all their options.  In order to help individuals make an informed decision, we will discuss some benefits of the WellCare prescription drug plans.

Important; CMS has guidelines in place to regulate the types of medications that prescription drug plan providers must cover.  This includes a minimum standard of benefits for providers to follow. The formulary for each plan Each plan meets the requirements as required by law. Because each plan differs, the cost and drugs included in the formulary can vary.

Find out about the Medicare drug price negotiations

Although Wellcare offers three different plan choices, it is important to review each plan formulary and make sure it provides coverage to fit the prescription needs for anyone considering enrollment.

The three Wellcare PDP plans for 2024

Some features of the Wellcare prescription plans

Wellcare has no or low premium plans available to provide coverage for individuals who qualify for Extra Help.  These plans are available in all states and offer low or no copays when enrollees purchase prescriptions from preferred pharmacies.

Some Wellcare plans include no deductible, so plans cover prescriptions on day one.

Wellcare has a nationwide network of preferred pharmacies that includes thousands of national, regional and local pharmacy chains. It also includes grocers and independent pharmacies as well.  These relationships help plan members save money on prescription drugs.

Use this link to the Wellcare preferred pharmacy tool and find a local in-network pharmacy.

Find a preferred pharmacy tool to find a local pharmacy.

The member service representatives are available either online at wellcare.com/PDP or by phone at 866-822-1339 (TTY – 711) during the hours of 8am – 8pm EST Monday – Friday. They can provide answers to members coverage or medication questions.

If you want to view the plan formulary (complete list of drugs each plan covers), visit Wellcare’s website or contact their member services department.

Medicare drug price negotiations

Because of the high cost of some prescription drugs for Medicare beneficiaries, the CMS has announced the first 10 drugs that will be subject for Medicare drug price negotiations.  The negotiations are part of the Inflation Reduction Act.  Up until recently, Medicare has been able to negotiate prices for medical care beneficiaries receive but this did not include the costs of medications.  This is about to change when the negotiated prices go into effect as of 2026.

Watch a quick video on the Medicare Part D changes 

Medicare will negotiate with drugmakers over the cost for the some of the most expensive medications and does not apply to drugs that have a generic alternative.  The first 10 medications chosen for negotiations are:

1. Eliquis (a blood thinner)
2. Enbrel (for rheumatoid arthritis)
3. Entresto (for heart failure)
4. Farxiga (for diabetes, heart failure & chronic kidney disease)
5. Fiasp & Novalog (for diabetes)
6. Imbruvica (for blood cancers)
7. Januvia (for diabetes)
8. Jardiance (for diabetes)
9. Stelara (for psoriasis & Chron’s disease)
10. Xarelto (a blood thinner)

According to the CMS, the 10 drugs above accounted for 20% of the Medicare Part D spending ($50.5 billion) during the period from June 2022 through the end of May 2023.  Part D of Medicare covers prescriptions taken by beneficiaries at home.  It does not cover medications administered by medical providers in medical facilities for treatment of things like cancer or other health conditions.  In these situations, Medicare Part B covers the necessary drugs.

Click here to read the drug price negotiation fact sheet 

Medicare beneficiaries spend billions of dollars for prescription drugs

Because of the high cost of some essential medications, beneficiaries sometimes have to either limit basic needs or go without the drugs that help maintain their quality of life.  All the while, drug manufacturers rake in record setting profits.

These 10 drugs are just the beginning

This list of 10 drugs is just the starting point.  In 2027 Medicare hopes to add 15 more drugs and even more in the years that follow.  This list will grow each year as long as the drug manufacturers are unsuccessful in their attempts to stop the drug cost negotiations.

Find out about the Medicare prescription payment program.

What will drug manufacturers do

If the drug companies do not agree to the negotiations, they face possible tax penalties.  Drug manufacturers can avoid the tax penalty if they remove their drug from the Medicare market.  However, if they do that, they will take lifesaving drugs from Medicare beneficiaries as well as lose a large part of their market share.

Some large drug companies are seeking legal counsel to stop the drug price negotiations.  They argue that the loss in income will affect their ability to fund necessary research and development and that in turn will reduce their ability to produce new medical treatments.

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Medicare Part D cap

Although Medicare Part D provides catastrophic coverage for high out-of-pocket prescription prices, there is no limit on the total amount beneficiaries pay out-of-pocket annually.  Beneficiaries with high drug costs exceeding the catastrophic level are required to pay 5% of their total drug costs unless they qualify for LIS.  The Inflation Reduction Act 2022 addresses the high cost of prescription drugs for Medicare beneficiaries.  The inflation reduction will reduce the out-of-pocket cost beneficiaries pay for medications and reduce federal government spending.  Some of these cost saving measures include changes to the benefits provided by Medicare Part D. This includes a Part D cap on out-of-pocket prescription costs for Medicare Part D plan enrollees.

The Part D cap makes both PDP plan providers and drug companies pay more of the costs associated with expensive drugs.  Some of this cost usually falls on the beneficiary and the federal government.

Watch a quick video on our YouTube channel about the Part D drug cap

Changes to Medicare prescription drug plans coming in 2024

In order to better understand the changes coming for 2024, we will quickly explain the 4 phases of prescription drug coverage as they are in 2023.

1. Deductible phase – beneficiaries pay 100% of their drug costs.  In 2023 the highest deductible amount is $505, although some plans do not charge a deductible.
2. Initial coverage phase – beneficiaries pay a co-insurance rate of 25% of their prescription costs and their Part D plan pays 75%.  This phase lasts until the costs reach $4,660 in 2023.  Many PDP plans charge co-payments and co-insurance in this phase instead of the standard 25% co-insurance rate.
3. Coverage gap (donut hole) phase – beneficiaries pay 25% of the prescription cost for all covered drugs both generic and name brand.  The PDP plan pays the remaining 75% for generic prescriptions and 5% for name brand drugs while drug manufacturers give beneficiaries a 70% discount for these drugs.
4. Catastrophic phase – In 2023 the catastrophic threshold is $7,400.  Once the threshold is reached, Medicare pays 80% of the drug cost while the PDP plan pays 15% and the beneficiary pays the remaining 5%.

The beneficiary’s costs in the catastrophic phase will change in 2024

In 2024 the 5% coinsurance payment for beneficiaries will be eliminated.  The PDP plans will pay 20% of the drug costs in this phase instead of the 15% they paid in previous years.  The catastrophic threshold in 2024 will be $8,000. The threshold limit includes the amount beneficiaries spend as well as the value of the manufacturers discount on prescriptions in the coverage gap phase.

In other words, there will be a spending cap for beneficiaries who take name brand drugs of about $3,2500 in 2024.  In 2025, there will be a hard cap of $2,000 on out-of- pocket costs for prescriptions.

Beneficiaries can save thousands on expensive medications

Beneficiaries who currently need expensive lifesaving medications to treat serious illnesses can now concentrate on recovering instead of worrying about how to pay the high cost of their medications.

The elimination of the 5% coinsurance spent in the catastrophic phase of Part D coverage will save enrollees thousands of dollars.

Please note:  this program benefits those enrollees who do not receive LIS for the cost of prescription medications.

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Choosing Medicare Drug Coverage

There are many things to consider when choosing Medicare drug coverage (Medicare Part D).  This is a very important decision that can cost you quite a bit if you are not careful.

Steps to help you choose the best Medicare drug coverage to fit your needs:

Decide what your medication needs are.

Make a list of all your current medications.  It is important to include the dose and how often you take them.  It is also important to consider which pharmacy you will use. Each plan has a list of preferred pharmacies that offer you a lower cost share when you use them.  You may also need to consider medications your doctor may add to your list in the near future.

Review your current coverage.

If you are new to Medicare and decide to go with Original Medicare (Part A and Part B), you need to purchase a stand-alone prescription drug plan (Part D).   Alternatively, you might opt for a Medicare Advantage plan (Part C) that includes prescription drug coverage.  These plans are referred to as MAPD plans.

If you already have either a Part D plan or an MAPD plan, you should review your plan’s Annual Notice of Change (ANOC) or Evidence of Coverage (EOC) document each year.  These resources will provide valuable notice of any changes in coverage, costs, or formulary for the upcoming year.

Know the Medicare enrollment periods.

It is important that you understand when you can enroll in a PDP plan.  For most people there are 2 main enrollment periods.  The initial Enrollment Period (IEP) occurs when you first become eligible for Medicare. It typically starts three months before your 65th birthday, includes your birth month, and extends for three months afterward.  Each year, The Annual Enrollment Period (AEP) Starts Oct 15 and runs until Dec 7 .  During this time, you can make changes to your Medicare coverage.

There are also some SEPs (Special Election Periods) where you can make changes to your plan.  Click here to learn more about SEPs.  

Please note; certain individuals who have a qualifying disability also have the option to enroll in a Medicare Part D (PDP) plan.

Compare the plan’s total cost.

Because there are many factors that make up the total cost for a Medicare plan, it is important to consider the plan premium, the cost of your medications, deductibles, copayments and co-insurance.  You also need to be aware of the coverage gap and catastrophic coverage thresholds, as these may affect your total out-of-pocket costs.

There are a couple ways to compare plan costs.  One of the best ways is to locate a licensed Medicare agent who is certified to offer plans from a variety of local carriers.  Agents should have access to online quoting tools that can show you plan comparisons. Comparisons include a cost breakdown of each prescription as well as plan premiums and other coverage information.  Agents are a great free resource.  They can help advise you on how coverage works and which plan will suit your personal needs.

Click here to view our YouTube video of Sunfire vs. Connecture Medicare quoting sites

You can also do a plan quote on your own by visiting medicare.gov and using the plan finder.  This is a free resource although, it does not offer a consultation like an agent can.

Consider each plan’s star rating.

Each year, Medicare provides star ratings for both PDP plans and MA/MAPD plans.  These ratings are based on many factors  and have a scale from 1 to 5 stars.  A rating of 1 is the lowest and 5 is the highest ranking.  Each plan is rated on the quality of the plan which is decided by customer satisfaction of care and customer service provided.

Remember:

Over time, both medication needs and health status changes; it is important to review your Medicare drug coverage each year during AEP.  This will help you prepare for the year ahead and keep costly surprises to a minimum, although none of us has a crystal ball.

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