A Change in Your 2025 Medicare Part D Deductible
As we might expect, there will be a change in costs with Medicare Part D prescription drug plans for 2025. So what will this mean for you?
If you have had a Medicare Part D prescription drug plan in 2016, you will notice some changes in your drug plan for 2025. First of all, the annual deductible on Medicare Part D plans will rise from $360 to $400.
Not all plans have a deductible in 2016, but most do; and those that do have a deductible of $360. Next year, any plan with a deductible will make you pay $400 out of pocket before entering the initial coverage part of your plan.
Are there any other changes in store for Part D coverage in 2025? (I’m glad you asked.) Yes, there are. In fact, there are actually some changes that can benefit you.
Understanding Your 2025 Medicare Part D Changes
Before we look at those changes, it is important to have a basic understanding of how a Medicare Part D prescription drug plan works. There are four main parts to a Medicare Part D plan; 1) the deductible; 2) the initial coverage phase; 3) the coverage gap (donut hole); and 4) the catastrophic phase.
Your Medicare Part D Coverage Gap / Donut Hole
We have already touched on the deductible. The coverage gap, or donut hole, of the plan is where your costs will rise significantly. (For more on this, see the Medicare Part D donut hole.) The retail costs of your medications during your deductible, added to the retail costs of your medications during your initial coverage period, count toward reaching the coverage gap. In 2016, once your retail costs hit $3,310, you would enter the coverage gap where you would pay a lot more for your medications.
Once your retail costs hit $4,850 in 2016, you would enter the third phase of the plan, the catastrophic phase. During this phase, your medication costs would drop drastically from the costs you pay during the coverage gap.
How You Enter the Donut Hole on Your Medicare Part D Plan
It is important to note the key phrase in the above descriptions; this critical term is “retail costs.” These costs are not based on what YOU pay; instead, they are measured by the retail listings of your medications. Allow me to illustrate.
Suppose you purchase a medication with your plan that has a retail value of $100, but your copay is only $25. It is the $100 retail value—not the $25 copay—that is added to determine where you are in your initial coverage period or how close you are to reaching the donut hole / coverage gap. So, while the 2016 initial coverage limit is $3,310, you may only pay for 25% of that amount prior to hitting the donut hole.
Similarly, while the percentage of retail cost you pay goes up during the coverage gap / donut hole, you would not pay the entire amount of the gap (from $3,310 to $4,850); instead, you would pay 45% of name brand costs and 58% of generic costs until the retail cost hits $4,850. Once you hit $4,850 in 2016, you reach the catastrophic phase where your costs significantly drop. (You would pay around 5% of the cost during this phase.)
To summarize, you pay 100% of the retail cost of your medications during your deductible, around 25% of the retail cost during the initial coverage phase, around 50% of the retail cost during the coverage gap, and about 5% of the retail cost during the catastrophic phase. Now that we understand the basics, we can look at the changes in Medicare Part D drug plans for 2017.
2025 Changes that Will Benefit You in Your Medicare Part D Plan
As we have already noted, the annual deductible on Medicare Part D prescription drug plans will move from $360 to $400, a $40 difference. That, of course, is not a positive change for you.
However, one adjustment that could benefit you is that the initial coverage limit will move from $3,310 in 2016 to $3,700 in 2017. The possible benefit you may experience on this change is that it will take you longer to reach the dreaded donut hole (coverage gap), where your medication costs would rise significantly. This, of course, saves you money (and that’s always good).
Another change coming for 2025 is that the range on the coverage gap will be from $3,700 to $4,950. That is a spread of $1,250, shrinking the donut hole by $290 from 2016 to 2025. If you have to experience the donut hole, then it is better to share in $1,250 of it than to split $1,540 (the 2016 share of it). So, this is another change that could save you money. (And we like that!)
Can You Save Even More Money?
While these changes can save you money, there are things you can do to save even more money on your medications in 2025. First, if you can, switch to generics. Granted, not all medications have a generic equivalent, but switching to lower-cost alternatives on your medications could keep you from entering the donut hole on your coverage.
Second, make sure you get the 2025 plan that fits your medications in the best way. Don’t make the mistake of choosing a plan based solely on its premium or on its deductible. The best plan for you depends on the combination of medications you take. Have your insurance agent (the one who helped you get a Medicare supplement) shop your medications for you. Getting the right plan will definitely save you money. (See how to find your best Part D drug plan.)
Third, if you qualify for “Extra Help” or Low Income Subsidy (based upon income—which, for 2016, is $17,665 for a single person and $23,895 for a married couple living together in 2016—and assets), you will avoid the coverage gap. This federal program also pays the deductible of a Medicare Part D plan, and it shares medication costs. If you think you may qualify, you can apply for this program online at https://www.ssa.gov/medicare/prescriptionhelp/, or you can call your state’s Medicaid office or the Social Security Administration.
If you don’t qualify for “Extra Help,” you still may be eligible for financial assistance from the manufacturer of any brand-name medication you take. Visit Medicare.gov to find out if there’s a Pharmaceutical Assistance Program for the medications you take.
There are also state pharmaceutical assistance programs available, depending on where you live. Again, visit Medicare.gov to find out if your state has a program.
The Takeaway for Medicare Part D Drug Plans
Remember: Any savings are good savings. Why spend more than you need to spend on your medications in 2025? In fact, here’s to a more prosperous 2025 for you.
