Insulin products covered by a Medicare Part D plan will always cost $35 or less for a 30-day supply, but, in 2023, when purchased in the initial deductible, the deductible will be reduced by the insulin product's total negotiated retail drug cost.

As background, starting in 2023, the Inflation Reduction Act (IRA) provides that all Medicare drug plans will offer insulin products found on the plan's formulary at a copay of no more than $35 for a 30-day supply – even if the Medicare drug plan has an initial deductible.

The IRA insulin coverage applies to both stand-alone Medicare Part D plans (PDPs) and Medicare Advantage plans that include drug coverage (MAPDs) and keeps the $35 or less cost-sharing throughout all phases of coverage including: the plan's Initial Deductible, Initial Coverage phase, and the Coverage Gap (or Donut Hole).  Even if a Medicare beneficiary has high prescription costs and reaches the final Catastrophic Coverage phase, they will still pay $35 or less for covered insulin for the remainder of the year.

However, since the Inflation Reduction Act was passed so late in 2022 – after Medicare Part D plans had already designed and submitted their 2023 plans – insulin coverage in 2023 will be handled slightly differently than Part D insulin coverage in future years.

Question:  How do low-cost Tier 1 and Tier 2 drugs excluded from the deductible compare to how a 2023 Medicare plan's Insulin products are covered in the deductible?

Many 2023 Medicare Part D prescription drug plans already exclude low-cost Tier 1 and Tier 2 drugs from the plan's deductible, and this means that a plan member has immediate coverage of these low-cost formulary drugs without first meeting the plan's deductible.

For example, if a person's Medicare Part D plan has a $505 deductible and Tier 1 drugs are excluded from the deductible, when the person purchases a Tier 1 generic that has a $20 retail cost and a $2 copay, the person pays just the $2 copay and the plan's $505 deductible remains unchanged.

However, unlike a low-cost Tier 1 or Tier 2 drug excluded from the plan's deductible, in 2023 the purchase of a formulary insulin product will cost no more than a $35 copay for a 30-day supply, but reduce a person's initial deductible by the total retail cost of the insulin product.

As an example, if a Medicare drug plan's negotiated retail cost for insulin is $200 and a person has not yet met the 2023 deductible of $505, the person will pay no more than $35 for the formulary insulin product.  However, the person's initial deductible will be reduced by the $200 retail insulin cost – and so the remaining deductible would now be $305 ($505 - $200).  The $200 retail cost would also count toward the Medicare beneficiary's total out-of-pocket spending.

As noted by Medicare:

"If someone with Medicare fills a prescription for a Part D covered insulin product before meeting the Part D deductible, their cost-sharing amount (up to $35 maximum for a month’s supply) will be applied to their deductible. Under the prescription drug law, a person with Medicare isn’t required to meet the Part D deductible before Medicare will cover a Part D covered insulin product or recommended preventive vaccine, and recommended preventive vaccines have zero cost sharing.

In addition, for plan year 2023, under the prescription drug law, the amount Medicare pays for a covered insulin product or recommended preventive vaccine that would otherwise have been paid by the Medicare enrollee (i.e., if the law’s cost sharing caps did not apply) will also count toward the person’s deductible and total True Out-of-Pocket (TrOOP) costs, and will count toward the person’s progression into the catastrophic phase of the Part D benefit." [emphasis added]

Important:  What if you paid more than $35 per month for your covered insulin product?

If you paid more than $35 for a 30-day supply of a covered insulin, contact your 2023 Medicare plan and ask about reimbursement – the toll-free telephone number for your plan's Member Services department can be found on your Member ID card and most of your plan's printed information.

Again, since many 2023 Medicare Part D plans may need time to update their internal systems to accommodate the new insulin law, Medicare will allow plans a 3-month grace period to correct their systems and reimburse their plan members for any over-payment.

As noted by Medicare in guidance to Medicare Part D plans:

"Section 1860D-2(b)(9) of the Social Security Act (the Act), as added by section 11406 of the [Inflation Reduction Act], imposes a $35 monthly limit on cost sharing for covered insulin products throughout all phases of the Part D benefit.

Subparagraph (E) of new section 1860D-2(b)(9) provides a three-month period (January 1, 2023 through March 31, 2023) during which a Part D sponsor may retroactively reimburse beneficiaries within 30 days for amounts paid in excess of the $35 cost sharing maximum in the event that the Part D sponsor has not yet adjusted its claims adjudication systems to implement the new insulin benefit at the point of sale. During this time, a beneficiary may pay the higher plan cost sharing at the point of sale, and the plan must refund the difference between that higher amount and $35 to the beneficiary within 30 days."

References: