Millions on Medicare to Save Money From $2,000 Rx Cap

Had the upcoming cap on out-of-pocket spending on Medicare Part D-covered prescription drugs been in effect in 2021, 1.5 million enrollees would have saved money on their medications that year, according to a new analysis released Feb. 8 by the nonpartisan KFF. And millions more could have lower drug costs over time.

In 2025, Medicare beneficiaries won’t have to pay more than $2,000 a year in copays or coinsurance for the prescription drugs their plan covers. The spending cap will apply to original Medicare enrollees who have a Part D prescription drug plan and beneficiaries with a Medicare Advantage plan that includes prescription drug coverage. After 2025, the out-of-pocket cap could increase if Medicare spending on prescription drugs continues to rise. 

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“This new analysis highlights the importance of the new out-of-pocket limit and why AARP fought so hard for the new law that created it,” says Leigh Purvis, AARP’s prescription drug policy principal. "Before the new law, millions of people in Medicare prescription drug plans were facing high out-of-pocket costs for their prescription drugs. Now their out-of-pocket costs will be capped every year, creating an important new protection for them and for anyone who has to take an expensive drug in the future.”

While they wait for the $2,000 cap to kick in next year, Medicare Part D enrollees with high drug costs are already benefiting from the elimination in 2024 of the 5 percent coinsurance requirement for those whose costs put them in the so-called catastrophic phase of Part D. This is the phase for people with ultra-high out-of-pocket drug costs. According to KFF, this change to catastrophic coverage translates to an effective cap of about $3,300 in out-of-pocket costs for brand-name prescription drugs.

The health law’s catastrophic phase change and the $2,000 out-of-pocket cap will “save thousands of dollars for people who take high-cost drugs for cancer, rheumatoid arthritis and other serious conditions,” the KFF report says. After 2025, the cap will be indexed for inflation.