As a result of the Inflation Reduction Act (IRA), the out-of-pocket maximum under all Medicare Part D plans will be capped at $2,000 per year starting January 1, 2025. While this significant change gives current Part D enrollees peace of mind when it comes to budgeting for their medical expenses, an unintended consequence may fall on those Medicare-eligible individuals enrolled in employer or other non-Medicare plans.
Each fall, health plans are required to provide notice to their enrollees regarding whether their prescription drug coverage is “creditable” under Medicare standards. Enrollees can also request this information at any time during the year.
A plan is “creditable” if coverage is at least as good as or better than the Medicare drug benefit. (42 C.F.R. §423.56). Creditable coverage is based on an actuarial equivalence test that measures whether the expected amount of paid claims is at least as much as the standard Part D benefit. With the $2,000 cap coming to Part D plans in 2025, it is unclear whether drug coverage provided by other insurance that is creditable now will continue to be considered creditable in the future.
After becoming Medicare eligible, individuals run the risk of accruing a Late Enrollment Penalty (LEP) for each month they are not enrolled in a plan providing creditable coverage. However, it is likely that many Medicare-eligible individuals do not understand what “creditable” means and what impact this could have in terms of penalties.
According to a Kiplinger article, CMS says it is evaluating the impact of the IRA on creditable coverage determinations and will not disqualify private plans that are considered creditable, for now. So, if a health plan’s prescription drug benefit was determined to be creditable in 2024, it should continue to be considered creditable in 2025, “as long as it continues to meet the criteria.” In addition, CMS added that it “is evaluating the continued use of the existing creditable coverage simplified methodology, or establishing a revised one, for plan year 2026, based on the recent changes to the standard Part D benefit made by the IRA.”
In short, CMS is aware of the issue and there are no steps Medicare-eligible individuals need to take other than to pay close attention to mail received from their plans. Concerned enrollees can always contact their plans for more information. This is an important issue to monitor if individuals do not receive adequate notice or are assessed late enrollment penalties as a result of this change.
August 1, 2024 – C. Huberty