Changes in Medicare Drug Coverage Rules

A 2022 law has brought a series of phased-in changes aimed at saving you money. But some yearly thresholds rise, meaning it’s possible to spend more.

Some people assume that Medicare, by itself, includes prescription drug coverage. That’s not the case.

Medicare Part A, the hospital benefit, covers your drug costs during hospitalization. But, otherwise, you’ll need to choose a drug plan for your prescriptions. You’ll also need to pay for it, unless you qualify for a low-income subsidy called “Extra Help.”

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The price and coverage can vary widely, depending on the plan you choose. Standard coverage is estimated to average $55.50 a month in 2024.

Don’t ignore drug costs, as they stack up. As many as one in five Medicare beneficiaries have been forced to skip or skimp on medications because of cost. If you’re concerned, be sure to get insurance and ask your doctor about generics and other cost-saving options.

Changes made in the 2022 Inflation Reduction Act are being phased in that include several steps to lower costs.

Understanding Medicare Part D

There are several ways to get prescription drug coverage if you are a Medicare recipient.

One option is to choose a Medicare Prescription Drug Plan (which adds drug coverage to original Medicare).

Another option is a Medicare Advantage plan (known as Medicare Part C), which operates much like an HMO or PPO, to include all Medicare Part A (hospital coverage) and Part B (Medical insurance) coverage, as well as prescription drug coverage.

It will be easier to qualify for “Extra Help” in 2024. You can benefit if you earn $21,870 ($45,000 for a family of four) or less. Some people are enrolled automatically. If you aren’t and may be eligible, you can apply through the Social Security Administration.

Your share of drug costs

If you qualify for a subsidy, you will pay no more than $11.20 for each brand name drug the plan covers and $4.40 for generics until a max of $8,000. After that, you won’t owe anything.

Without a subsidy, you’re responsible for paying your drug costs up to an amount set in advance, called a deductible. For 2024, the maximum deductible for Medicare plans is $545. Some plans have lower deductibles or none.

Once you have paid $545 for medications, you will pay your drug costs until you and your plan have paid 5,030, the 2024 limit.

At this point, you’ll owe 25 percent of the cost of any covered prescription until you qualify for catastrophic coverage.

In the past, people had to pay 100 percent of their costs during this phase, called the “donut hole.” Such expenses could be devastating.

For example, if you take brand name drugs in 2024, you may pay the entire cost until you reach the limit. From then on, you’re getting catastrophic coverage and won’t owe anything when you fill a prescription.

In the past, people paid 5 percent of their prescription cost even with catastrophic coverage. That copay no longer applies, potentially saving some people thousands of dollars.

Changes coming in 2025

In 2025, the out-of-pocket maximum is lowered to $2,000.

You’ll also have the option to spread your out-of-pocket costs over the year rather than deal with a big bill during any given month.

Drugs will cost less

Drug companies must pay rebates if drug prices rise faster than overall inflation. Copays for insulin for people with type 2 diabetes are capped at $35 a month. It is also easier and cheaper to get vaccines.

In addition, from 2026 to 2029, the government will have the power to negotiate lower Medicare costs for certain high-cost drugs.  

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