The Inflation Reduction Act: Changes to Medicare Part D

May 22, 2024

The Inflation Reduction Act (IRA) was signed into law on August 16, 2022, and has significant impacts on the Medicare Part D program. The IRA aims to lower prescription drug costs and make health insurance more affordable. Patients may benefit from lower prescription drug prices in Medicare through price negotiation with manufacturers and a maximum cost on certain medications.

There have been significant changes since the passing of the law and further plans for Part D redesign in the future.

  • Previously, patients continued to pay 5% of drug costs in the catastrophic phase for the rest of the year. With the IRA, patients have a $0 copay for all medications in the catastrophic phase, which was implemented at the beginning of 2024.
  • Starting in 2025, there will be a yearly cap of $2,000 for members on out-of-pocket prescription drug costs.
  • Beginning in 2025, patients will also have the option to pay their prescription costs in monthly amounts spread over the year rather than all at once.
  • The IRA also places a maximum monthly cost of $35 for insulin for all Medicare patients.
  • Additionally, there are limits to premium increases on health plans, mandated coverage for adult vaccines recommended by the Advisory Committee on Immunization Practice (ACIP), and expansion of the low-income subsidy program.1

Chart #1:

Under the new benefit in 2025, there will be three phases of Part D instead of four:

  1. Deductible phase
  2. Initial coverage phase
  3. Catastrophic phase

The coverage gap phase will be eliminated.2

Chart #2:

Implemented ChangesAnticipated Changes in 2025
$0 for recommended adult vaccinesElimination of coverage gap phase
$35/month insulin capAnnual out-of-pocket maximum of $2,000
Expansion of Low-Income Subsidy (LIS) program 

Chart #3:

Before the Part D redesign takes place in 2025, there are currently four phases within prescription coverage that patients move through throughout the calendar year3:
DeductibleInitial CoverageCoverage Gap (Donut Hole)Catastrophic Coverage

Chart #4:

Example of Current Coverage Phases:
DeductibleInitial CoverageCoverage Gap (Donut Hole)Catastrophic Coverage
The plan’s deductible is $545The plan helps pay for medicationsPatient responsible for 25% of the cost of drugs until $8,000 spent in out-of- pocketPatients pay $0 for covered drugs for the rest of the year
The patient pays the full negotiated price of the drug until the deductible is metThe patient pays coinsurance or copayment based on the plan’s benefit structure  

Patients move through these phases of coverage at different times, depending on their medications and health plan design. With the changes in coverage phases, patients may go from paying roughly $47 for a 30-day supply of medication to paying a coinsurance of a couple of hundred dollars. This price change can lead to issues in affordability, adherence, and disease state management.

Hyperlinked footnotes:

1 – The Inflation Reduction Act Lowers Health Care Costs for Millions of Americans | CMS

2 – Draft CY 2025 Part D Redesign Program Instructions Fact Sheet | CMS

3 – Phases of Part D coverage – Medicare Interactive

How are we doing?

Please let us know what you think of the Provider Newsroom information and news.

Contact Us