Patients with Medicare Part D plans could pay less out of pocket starting in 2025 when a provision of the Inflation Reduction Act of 2022 eliminates a gap in coverage for prescription drugs.
The gap, nicknamed the “donut hole,” is a period of time in which beneficiaries with Part D plans are required to pay 25% of the cost of their drugs. The donut hole period begins when the patient and health plan combined have paid $5,030 toward prescription drugs and ends when the beneficiary has spent $8,000 out of pocket. At that point, the beneficiary moves into the “catastrophic coverage” phase, in which the Part D plan covers all costs of prescription drugs for the remainder of the year.
“[Out-of-pocket expenditures during the donut hole period] could be substantial depending on the drug and the terms and conditions of your specific plan,” said Nick Hut, a senior editor at the Healthcare Financial Management Association.
In 2025, Medicare will put a $2,000 cap on out-of-pocket costs for Part D drugs. Once a beneficiary has paid that amount, the catastrophic coverage period will begin with no further cost sharing for the remainder of the year.
“One of the goals when they drafted this legislation was to make Medicare a little bit more affordable for beneficiaries,” Hut said. “[This change] stands to make [prescription drugs] a lot more affordable for a lot of folks.”