What’s the Inflation Reduction Act ?
The Inflation Reduction Act 2022 is a federal law with three goals in mind:
- To reduce federal debt
- To lower the price of prescription drugs
- To promote clean energy usage
I won’t go into all that the Inflation Reduction Act (IRA 2022) encompasses because then you would be reading all day. What I want to focus on is how this law changed the way some of the companies handle their Part D, prescription drug, coverage particularly in our area.
Before 2025 most of the plans in our area had four stages of coverage.
- Stage 1: Deductible. This is the amount of money you had to pay out of pocket before the insurance would kick in. Most plans in our area had a $0 deductible which meant that coverage started with the very first prescription.
- Stage 2: Initial coverage. After meeting the deductible (even if it was technically $0) you could expect to pay a copay or coinsurance on that drug depending on which tier it fell under. This would continue until you reached what came to be known as the coverage gap or “donut hole”.
- Stage 3: The Gap. At this you would be responsible for up to 25% of the cost of your prescription drugs, no matter which tier they were. Once a certain amount of total spending for prescription drugs was reached it was considered “catastrophic”.
- Stage 4: Catastrophic. Once the total spending on prescription drugs (between you, the insurance, and the drug companies) reached a certain dollar amount ($8,000 in 2024), it was considered catastrophic and your plan would cover 100% of your covered prescription drugs for the rest of the calendar year.
That was then, this is now…
New in 2025 there is no longer a “Gap” stage for any Medicare prescription drug plan. Most plans in our area have three stages of coverage.
- Stage 1: Deductible. This is the amount of money you will pay out of pocket before the insurance kicks in, even on covered drugs. Most plans in our area now have a deductible for tiers 3 and 4 that must be met before they will help with the cost of the drugs.
- Stage 2: Initial coverage. After meeting the deductible (even if it is technically $0) you can expect to pay a copay or coinsurance on your prescriptions, depending on which tier it falls under. Most plans in our area do not have a deductible for tiers 1 and 2, so initial coverage on those tiers would start immediately. Once the total amount of the cost of the prescriptions (out of your pocket) reaches $2,000 it moves to the next stage which is catastrophic coverage (there is no “donut hole” or “coverage gap” starting in 2025).
- Stage 4: Catastrophic. Once your total spending on prescription drugs reaches $2,000 your insurance will cover 100% of your covered Part D prescription drugs for the rest of the calendar year.
I hope that helps but if you still have some questions, I’m happy to talk with you and clear up any confusion. I know that navigating the Medicare system can be frustrating at times and that’s why I’m available all year long to answer your questions and help you find a plan that fits your individual needs. Feel free to contact me any time.