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Seven ways insulin purchases impact your 2023 Medicare Part D drug plan coverage

Category: Diabetes and Diabetic Coverage
Published: Feb, 27 2023 02:02:49

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.

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

The IRA insulin coverage applies to both stand-alone Medicare Part D plans (PDPs) and Medicare Advantage plans that include drug coverage (MAPDs) and maintains the $35 or less cost-sharing throughout all four parts of Part D coverage: (1) the plan's Initial Deductible, (2) the Initial Coverage phase, (3) the Coverage Gap (or Donut Hole) and even through (4) the final Catastrophic Coverage phase.

Here are a few key differences of how your 2023 Medicare Part D plan is covering insulin (that you might not notice in future years).

(1) Insulin purchased while you are still in your Medicare Part D plan's Initial Deductible costs $35 per month, but reduces the deductible by the full retail price of the insulin.

Many Medicare Part D plans and Medicare Advantage plans provide drug coverage with an initial deductible that must be paid before the plan will begin to share the cost of prescriptions with the plan beneficiary.

Usually a person will pay the full retail cost for their drugs until the deductible (usually $505 in 2023).  However, in 2023 when insulin is purchased in the initial deductible, the copay will be $35 or less and the remaining amount of your plan's deductible will be reduced by the insulin product's total negotiated retail drug cost.

For example, if your Medicare drug plan's retail cost for your insulin is $200 and you have a 2023 deductible of $505, you will pay no more than $35 for the formulary insulin product.  However, your initial deductible will be reduced by the full $200 retail insulin cost.  So in this example, your $505 deductible will be reduced by $200 and your remaining deductible after the insulin purchase will be $305 ($505 - $200).

The $200 retail cost of the insulin would also count toward your annual total out-of-pocket spending (TrOOP) – as if you paid the full retail price yourself.  So, in 2023, you pay $35 and get credit for $200 toward your Initial Deductible and your TrOOP threshold.

As noted by Medicare (CMS):
Question:  "What amounts paid for insulin and recommended preventive vaccines will count toward the Medicare 2023 Part D deductible [and Catastrophic Coverage?"

"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." [highlighting added]
For more, please see our Frequently Asked Question: "How does the purchase of a Medicare Part D insulin affect my 2023 drug plan's deductible?"

(2) Insulin purchased while you are in your Medicare Part D plan's Initial Coverage Phase costs $35, but credits the plan's previous cost-sharing toward your out-of-pocket spending (when greater than $35).

Once you leave your plan’s initial deductible (if any) and you purchase insulin during your Initial Coverage Phase, you will again pay no more than $35 for a 30-day supply of covered insulin, however you will get credit for your plan’s tiered copay or percentage co-insurance toward your out-of-pocket spending (TrOOP) - when the cost-sharing is greater than $35.  And, as usual, you will still get credit for the full retail drug cost toward reaching your plan’s initial coverage limit (ICL) – which is the entry point to the Coverage Gap or Donut Hole.

As an example, if your Medicare Part D plan usually has a $47 copay for insulin (that has a $200 retail cost), you will pay no more than $35, but you will get credit of the $47 copay toward your out-of-pocket spending (accumulated TrOOP) and the $200 retail cost will count toward reaching your 2023 Initial Coverage Limit of $4,660.  So, in 2023, you pay $35 and get credit for $47 toward your TrOOP threshold.

Tip:  Your Medicare Part D plan's monthly Explanation of Benefits letter may show that you have received more credit for your insulin purchase than what you actually paid.

(3) Insulin purchased while you are in your Medicare Part D plan's Donut Hole costs $35 (or less), but you may receive the out-of-pocket spending credit equal to the Donut Hole discount.

After exceeding your plan's Initial Coverage Limit (retail value of purchased drugs exceeds $4,660 in 2023), you enter the third phase of Part D coverage: the Coverage Gap or Donut Hole, where you receive an automatic 75% Donut Hole discount off the retail price of the formulary drug (generic or brand-name).

For example, if your insulin product has a $200 retail cost, you would expect to pay $50 (or 25% of $200) before the Inflation Reduction Act.  But your cost will be limited to the $35  copay.  However, you will receive the $50 credited toward your TrOOP.  This would account fro the $35 you paid for your insulin plus the $15 paid on your behalf to meet the original $50 Donut Hole cost.  So, in 2023 you pay $35 and get credit for $50 toward your TrOOP threshold.

(4) Insulin purchased while you are in your Medicare Part D plan's Catastrophic Coverage, you will pay $35 or less depending on the retail cost of your insulin retail drug cost.

After exceeding your plans out-of-pocket spending threshold (TrOOP - $7,400 in 2023), you enter the fourth (and last) phase of Part D coverage: Catastrophic Coverage.  In Catastrophic Coverage, you usually will pay no more than 5% of the drug's retail price (or $10.35 for brand-name drugs or $4.15 for generic drugs - whichever is greater).

For example, usually if you were using an insulin product with a retail price of $200.00, you would pay no more than either a fixed $10.35 or $10 (5% of the $200 retail cost), whichever is greater - in this case, $10.35 which is less than the $35 maximum - so the person would pay only $10.35.

(5)  Paying more than $35 per month?  You can get reimbursed for over-payment of your 2023 insulin products.

Question:  My Medicare Part D plan charged me more than $35 for a 30-day insulin supply - what's happening?

Since many 2023 Medicare Part D plans are still updating their internal systems to accommodate the new insulin coverage law, you may find that, during the first months of 2023, you are paying more than $35 for a 30-day supply of an insulin product that is covered by your plan.

Medicare has anticipated the possibility of overpayment and is allowing 2023 Medicare drug plans a 3-month grace period to correct their systems and reimburse their plan members for any amount paid above the $35 copay.

Medicare notes the drug event reporting documentation:
"The [Inflation Reduction Act] allows for a 3-month grace period for plans to fully implement the insulin cost sharing maximum at the point of sale. This means that a beneficiary may pay at the point of sale the 2023 plan cost sharing that was previously established with the 2023 bid for the covered insulin product through March of 2023 but must be reimbursed by the plan for any amount paid above $35 for a month’s supply within 30 days post-point-of-sale. " [highlighting added]
Important:  If your Medicare Part D plan has charged you too much for your insulin, please wait 30 days for your reimbursement and if not received, then contact your plan using the toll-free number found on your Member ID card and ask for reimbursement.

(6) The IRA covers the insulin delivered by your Part D insulin pump and, starting July 1, 2023, will begin paying for insulin delivered by Part B insulin pumps.

Question:  Does the Inflation Reduction Act cover my insulin pump?

No.  However, the Inflation Reduction Act will limit the cost of your insulin delivered through a pump to $35 or less per month (starting July 1, 2023 for Part B insulin).  As noted by Medicare:
"The term “insulin product,” for purposes of section 1860D-2(b)(9) of the [Inflation Reduction Act], means a product that contains insulin, including combination products that contain more than one type of insulin. In addition, “insulin product” includes a combination product that contains both insulin and a non-insulin drug or biological product. Medical supplies associated with the injection of an insulin product, when such supplies do not contain insulin and are not approved under section 505 of the FFDCA or licensed under section 351 of the PHSA, are not subject to the requirements of section 1860D-2(b)(9) of the [Inflation Reduction Act]." [highlighting added]
(a) For Part D Disposable Insulin Pumps

According to Medicare, disposable "patch" insulin pumps (such as "Insulet Omnipod") that may be covered by your Medicare Part D drug plan are considered insulin delivery or supply systems and are not covered under the Inflation Reduction Act and not subject to the $35 or less copay.  However, the 30-day supply of insulin that is delivered by the pump will be covered as a $35 or less 30-day copay.

Medicare notes:
"If your Part D plan covers your disposable insulin patch pump, the pump is considered an insulin supply.  Because [the pump] isn’t an insulin product, the pump is not subject to the $35 cap on cost sharing and might cost more than $35, and the plan deductible may apply. Also, because the disposable pump is a supply (and not a drug), people with Medicare cannot add the pump to a drug list in Medicare Plan Finder."
(b) For Part B Traditional Insulin Pumps

If your insulin pump is covered by Medicare Part B as Durable Medical Equipment (DME), your $35 (or less) insulin coverage will begin July 1, 2023.  So, starting July 1st, the cost of your Medicare Part B insulin delivered through your insulin pump cannot exceed a $35 copay per month.

Medicare notes:
"From January 1, 2023 through June 30, 2023, the Part B deductible will apply for insulin used through a traditional pump covered under the durable medical equipment benefit.  However, beginning July 1, 2023, the Medicare Part B deductible does not apply for insulin used through a traditional pump that is covered under the durable medical equipment benefit. In addition, beginning July 1, 2023, cost sharing through Medicare Part B cannot be more than $35 for a month’s supply. If you have Medicare Supplement Insurance (Medigap) that pays Medicare Part B coinsurance/copayments, that plan should cover the $35 (or less) cost for insulin beginning July 1, 2023."

(7)  Did you choose a Medicare drug plan that does not cover your insulin?  A 2023 Special Enrollment Period is available at any time for people using insulin.

Medicare has created a new Special Enrollment Period (SEP) for the 3.3 million Medicare beneficiaries using insulin products.  Medicare beneficiaries can use this SEP to change their Medicare drug plan (PDP or MAPD) once, at any time throughout 2023.  This SEP is only available by calling a Medicare representative at 1-800-Medicare (1-800-633-4227).

As reference see:

PDE Reporting Instructions for Implementing the Cost Sharing Maximums Established by the Inflation Reduction Act for Covered Insulin Products and ACIP-Recommended Vaccines for Contract Year 2023 (September 26, 2022)

CMS: Frequently Asked Questions about Medicare Insulin Cost-Sharing Changes in the Prescription Drug Law (CMS Product No. 12173) (Updated January 2023)

MPMS Memo: Contract Year 2023 Program Guidance Related to Inflation Reduction Act Changes to Part D Coverage of Vaccines and Insulin (September 26, 2022)

Additional CY 2023 PDSS Model Guidance Related to Inflation Reduction Act (IRA) Changes to Part D Coverage of Insulin (October 11, 2022)

Inflation Reduction Act (IRA, P.L. 117-169)

CMS: 7 Things to Know about Medicare Insulin Costs (CMS Product No. 12172) (January 2023)

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