Changes to Part D actually began in 2022, as the result of legislation, called the Inflation Reduction Act,, passed in 2021. Previous newsletters have discussed the Part D landscape of the last few years. In multiple newsletters since last July, we wrote about the changes to the Part D plans coming for 2025. Here is a synopsis::
Source:: KFF 8/22The original 4-layer design of Part D (seen in the graphic above as years 2023 and 2024) has been changed significantly. The catastrophic layer was effectively eliminated in 2024 for members, and the coverage gap (donut hole) is gone as of 2025. The remaining stages of the Part D program are Deductible, Initial Coverage, and Catastrophic (in which the insured has no out-of-pocket financial responsibility for covered medications). The colorations indicate who pays and at what stages payments are made. 2025 marks the first year that members’ out-of-pocket for outpatient prescription drugs had a financial cap or maximum.
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In 2025, the standard model contains a maximum $590 deductible layer, and a $2000 out-of-pocket maximum. (OOP) After the OOP has been reached, The term Catastrophic segment is being used to refer to Rx costs that are incurred after the OOP has been met.
Many carriers, particularly with the Part D structures in Medicare Advantage plans, charge less than the maximum deductible or no deductible at all, in which case the insured starts paying the plan-designed copays at the beginning of the year.
A new carrier-based program for payment of drug copays also began in 2025 and is aimed at helping out people who have one or more expensive medications. The program is called the Medicare Prescription Payment Plan or 3MP (sometimes MP3) for short. As a rule of thumb, if you are prescribed a medication that has a monthly pharmacy retail cost of roughly $600 or more, you can take advantage of the Part D plan 3MP to pay your costs over a twelve month period, without interest cost. To sign up for this, the carriers may reach out to you or you can call them to enroll.
Each carrier is responsible for creating and managing a 3MP plan of their own. There are no fees or carrying costs for the insured. This plan is not designed to offer a cost savings for the meds you are taking, just an extended period over which to pay for those meds.
Finally, let’s address the out-of-pocket maximum of $2000 (OOP), which has proven very confusing. The phase of a Part D plan past the deductible segment, is still called the Initial Coverage phase. Whatever plan copays or coinsurance charged by the plan that you have, will be paid in the initial coverage segment. Whatever other costs for your medications are paid by a combination of the plan itself (the major fraction) and a small manufacturer discount. In addition, as the graphic above notes, the plan will pay for about 60% of the drug cost, and a small fraction will be paid via discount by the manufacturer of the medication. It is also possible that a subsidy will be paid by the government (ie. CMS) depending on what ever programs are in place during the plan year. This is one reason I have coined the termed that in the initial coverage segment, the $2000 is actually an “all payors OOP.”
Here is a graphic that helps explain how the OOP is computed by CMS how the OOP accumulates. In periodic Part D Explanations of Benefits sent to you by your carrier, these types of break outs will be shown. [Ed. notes:: “…the amount applied by CMS (Medicare) towards the benefit cap (ie. OOP Max) can use one of two methods: Enhanced Alternative plan (which is used for most Medicare Advantage plus Prescription Drug plans) and the Standard Benefit method. The EA method represents either the cost the member would have paid under the Standard method or the amount paid by the member using the plan’s benefits structure, which ever is greater] It is possible, depending on the drugs prescribed over the course of the plan year, that the member may not actually come out-of-pocket for $2000 — it could be less — yet still satisfy the OOP Max.
A couple of closing notes:: in 2026 the deductible for Part D is scheduled to increase to $615 and the OOP Max increase to $2100.
You should also be aware that the changes to Part D and other parts of Medicare in 2024, leading into 2025 caused a disruption in the Medicare “universe” that went beyond regulatory matters. On the Part D side, particularly with the stand alone Part D plans, several carriers decided to halt the payment of commission payments to brokers, some extending the non-commissionable status to certain Medicare Advantage plans. Some carriers terminated payments on all Part D business, even if had been placed in years past, while some terminated commissions just on new business but not renewals, which was most common. Some carriers continued to pay commissions on stand alone Part D plans and on Medicare Advantage with Prescription Drugs plans.
Brokers were impacted in several ways — brokers with hundreds or thousands of clients saw losses of income amounting to thousands of dollars. A large number of brokers decided to discontinue servicing Part D business for clients. For 2026, some early information seems to indicate that more carriers will join the non-commission group, and if brokers follow suit by declining to offer assistance with reviewing and analyzing Part D plans for clients, the impact for Medicare members will be a heavy burden. We, at InsuranceProfessor,net, despite a significant loss of revenue for Part D plans, have decided to continue offering full service to clients and prospects. If this changes, we will post our new policy.