Changes Are Coming to Medicare Part D
November 14, 2024 | Cathryn Reher
The Good and Bad of These Changes
First, the good news: the Inflation Reduction Act (IRA) will cap the out-of-pocket maximum at $2,000 for all Medicare Part D plans starting January 1, 2025. Medicare Part D plans provide coverage to enrollees for prescription drugs. This will enable Medicare Part D enrollees to better budget if they have had historically high out-of-pocket prescription drug costs.
The difficulty of the law change will be the impact for those who are Medicare-eligible but are enrolled through an employer or other health insurance plans. These plans are required to provide health insurance coverage that is just as good or better than Medicare standards. A plan that is as good or better than Medicare standards represents “creditable alternative coverage.” If a plan is not creditable, individuals run the risk of accruing a Late Enrollment Penalty (LEP) for each month they are not enrolled in a plan providing creditable coverage.
The specific concern with the Part D law change is that prescription drug coverage under alternative insurance plans may not be as good as the new Medicare Part D coverage and therefore may not meet the creditable alternative coverage requirement. This would then require individuals to drop their employer or other health insurance plans, which are generally more cost-effective than Medicare health insurance plans. The Medicare enrollment period is ongoing right now, leaving individuals not knowing whether they need to unenroll in their employer or other health insurance plans to avoid an LEP. Thankfully, the Centers for Medicare and Medicaid Services (CMS) has finally issued guidance that it will not be enforcing the creditable alternative coverage requirements for Part D during 2025. As a caution, any employer or other plan must continue otherwise to provide creditable alternative insurance. There is no indication this exception will continue to apply in 2026, and individuals will need to follow up on the status of this issue during the next Medicare enrollment window in October 2025.
The Elder Law practice within Barna, Guzy & Steffen, Ltd., is committed to keeping its clients and the public informed about significant policy changes affecting them and to helping persons with disabilities and the elderly navigate their long-term care planning needs.