Newsletter

MARKETING OF 2025 MEDICARE ADVANTAGE, MEDICARE ADVANTAGE PRESCRIPTION DRUG, AND STAND-ALONE DRUG COVERAGE (PART D) BEGINS TODAY 

Marketing of 2025 Medicare plans begins today (i.e., 2025 plans can begin being discussed today), but the Annual Enrollment Period begins October 15 and ends December 7 for enrollment in a 2025 Medicare Advantage, Medicare Advantage Prescription Drug, or Stand-Alone Drug Plan (Part D). 

This is a year of significant change to these plans. It is important to recognize the following:

1.      ALL drug plans must comply with the requirements of the Inflation Reduction Act. (See the following article). There will be major changes to stand-alone Part D plans this year. A number of stand-alone Part D carriers will not pay commissions to agents writing 2025 plans, and one carrier is not paying commissions for plans whenever they were written. As a result, you may find it difficult to find an agent who will help you understand and enroll in stand-alone drug coverage (Part D) this year. Experienced agents with large blocks of Part D drug business will simply not have the time to analyze and service Part D drug plans for their clients.   Anticipating this, we began utilizing a system called RetireFlo and started asking our clients to update their medication lists in August.  Nevertheless, 2025 plans won’t be able to be downloaded until at least today so that medication lists can be compared against 2025 plans. We will be communicating with our clients by mail, email, and telephone and follow all Scope of Appointment requirements (a Scope of Appointment form must be executed at least 48 hours before a plan can be discussed) and will make every effort to help all our clients make their Part D decisions for 2025.

2.     Because of reduction in payments to carriers from Medicare, unexpectedly higher utilization of benefits than carriers expected, and other factors, many Medicare Advantage and Medicare Advantage Prescription Drug Plans will reduce benefits on an overall basis for 2025. It is particularly important that you read and understand the Annual Notice of Change (ANOC) document (see third article) this year to understand how your plan may be changing.

3.     There will be a higher than usual number of plan terminations. In Florida, Broward County in particular will experience a number of PPO plan terminations. If you’re affected, this will be explained in your ANOC. Beneficiaries with terminated plans will have a special enrollment period through February 28 to enroll in new plans. HOWEVER, such beneficiaries should enroll no later than December 31 for a January 1, 2025 effective date; otherwise, they will experience a gap in coverage. Most of these terminations involve PPOs but some HMO plans are also affected. We will be alerting all our clients through our Send Out Card system if they will experience a plan termination.

MOST RECENT OVERVIEW OF CHANGES TO DRUG PLANS FOR 2025

Drug plans will experience significant changes in 2025. There has been conflicting information provided by carriers, particularly how the $2,000 cap for covered drug coverage is calculated and how the M3P “smoothing” program will be administered. The following is our latest understanding of how drug plans will work; we will communicate additional information if and when further clarication becomes available.

Out-of-pocket drug spending for covered medications will be capped at $2,000; this number will be indexed starting in 2026.

The coverage gap (aka “donut hole”) phase will be eliminated. This means that copays/coinsurance levels will remain unchanged from the initial coverage level until the $2,000 cap is met. Once that cap is met, there will be no cost for covered medications to the beneficiary.

This means that all plans will have a maximum of three different phases: (1) the deductible phase, if any; (2) the initial coverage level phase; and (3) the catastrophic phase.

The $2,000 out-of-pocket calculation will be based on a True Out-Of-Pocket Costs (TrOOP) calculation which will work differently than the way TrOOP was calculated previously.  

TrOOP will be calculated in accordance with the deductibles, copays and coinsurance for the plan you have selected. Manufacturer’s discounts will no longer be counted in the TrOOP calculation. Drugs must be purchased through a network pharmacy or out-of-network in accordance with the plan’s out-of-network policy (e.g. emergencies). Drugs must be on the plan’s formulary, or the beneficiary must have a formulary exception for that drug.

Additional details on TrOOP calculations are included in this article.

Carriers also have the option of offering “enhanced” benefits such as folic acid, 50,000 units of Vitamin D, and sildenafil/tadalafil. Payments a beneficiary makes for an enhanced medication will not count as TrOOP, and beneficiaries will pay the same for an “enhanced” medication during all drug plan phases (i.e. unless these enhanced medications have a $0 copay these medications will be charged with the same copay irrespective of which of the three drug phases a beneficiary is in).

Part D enrollees will have the option of spreading out their out-of-pocket costs over the year rather than face high out-of-pocket costs in any given month. This feature is provided through a program administered by the carrier (not the pharmacy) called the Medicare Prescription Payment (M3P) Plan. Under this program beneficiaries will have the option of spreading out their prescription payments over the year (this is called “smoothing). Carriers are interpreting the M3P requirements differently and, hopefully requirements will be standardized and all carriers will be administering this program the same way. Beneficiaries who expect to reach $2,000 in out-of-pocket costs or who expect to buy an expensive medication ($600 or more) are most likely to be those who benefit under this plan.  Beneficiaries will need to enroll in this program and, if enrolled, will pay their medication costs to the carrier rather than the pharmacy.

NOTE: The latest interpretation and, to our knowledge, the most accurate description of how the M3P program works is that an individual must spend at least $600 on a specific drug in a particular month in order to qualify for the program. The program works on a medication-by-medication basis.   ONLY when an individual spends $600 or more in a particular month on a specific drug can the beneficiary request that drug to be included in the M3P program. The program applies on a drug-by-drug basis and each drug can be included in the M3P program ONLY when the spend for that drug is $600 or more in a particular month. We’ve seen excerpts of a training program Medicare (CMS) gave to pharmacists, and this is how that training program explains how the program works. 

Also, the share of Medicare Part D drug costs paid by plans, drug manufacturers, and Medicare will change. Most significantly, carriers will pay 60% of the cost of medications in the catastrophic phase (up from 20% in 2024).

Because of these changes, almost all beneficiaries will see changes in their Part D plans in 2025. Changes could include a deductible of up to $590 for some or all drug tiers. Premiums for stand-alone Part D drug plans will increase in many instances (one carrier will still have a $0 premium plan in most states), and it is also possible drugs will be reclassified into different tiers and that changes in utilization management requirements (e.g., quantity limits or prior authorization) will be made for some plans. 

Medicare Advantage plans that include drug coverage (referred to as Medicare Advantage Prescription Drug plans) must also comply with the Inflation Reduction Act requirements. Many MAPD plans will not have deductibles in their drug plans (but check to verify whether your MAPD plan now requires a deductible for some medication tiers). Also, many plans are changing some copays or coinsurance percentages (or changing from copays to coinsurance for particular tiers) for some or all non-generic drug tiers.

Beneficiaries should read their Annual Notice of Change (ANOC) document when they receive it from their carrier. This document will communicate changes in the plan design and either mention other changes or refer beneficiaries to the plan’s formulary to determine drug tier and utilization management changes.

See the following Kaiser Family Foundation chart for changes between 2023, 2024, and 2025 regarding share of Medicare Part D drug costs paid by enrollees, Plans, Drug Manufacturers, and the government (i.e., Medicare) in each drug phase.

Please see this article from the Kaiser Family Foundation for a more detailed summary of the 2024 and 2025 changes.

2025: READ YOUR ANNUAL NOTICE OF CHANGE (ANOC) DOCUMENT!

Medicare Advantage, Medicare Advantage Prescription Drug, and stand-alone Medicare Drug Coverage (Part D) will probably be changing more in 2025 than in any previous year, and, while some benefit provisions may be improved, this is a year when there will be a higher than usual amount of benefit reductions. Accordingly, it is more important than usual that beneficiaries understand how their plans will change this year.

Because of the increased importance of reading your ANOC this year, we encourage you to click on this video that appeared in Retirement Daily  where Medicare expert Jae Oh, author of Maximize Your Medicare, discusses significant shifts in Medicare plans and urges beneficiaries to carefully review their Annual Notice of Change:

About Paul Cholak

Paul is a licensed, independent health and life insurance agent and has over forty years of benefits experience and specializes in helping Medicare beneficiaries obtain health insurance. However, he offers a complete array of life and health insurance products to individuals of all ages.

He guides Medicare beneficiaries through the steps of getting insurance and is available to help clients both BEFORE and AFTER they've made their purchase decision.

Disclaimer for Part C and D plans: "We do not offer every plan available in your area. Any information we provide is limited to those plans we do offer in your area. Please contact Medicare.gov or 1-800-MEDICARE (TTY: 1-877-2048) to get information on all your options."

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