Medicare $2,000 prescription drug cap may save enrollees hundreds: AARP

Most Medicare patients who hit the brand new $2,000 cap on out-of-pocket spending for pharmaceuticals could see massive savings, despite changes in premiums, based on a report released Thursday by AARP. 

The findings suggest the cap could possibly be an enormous profit to older adults in Medicare who struggle to afford high-cost drugs for cancer, rheumatoid arthritis and other serious conditions. Those seniors and other U.S. patients pay two to 3 times more for pharmaceuticals than people in other developed nations.

The limit went into effect initially of this yr. It’s some of the consequential provisions in President Joe Biden’s 2022 Inflation Reduction Act, designed to chop high drug costs — together with a latest $35 monthly cap on insulin and Medicare drug price negotiations with manufacturers.

The report found that 94% of the greater than 1 million enrollees in Medicare Part D expected to achieve the brand new cap in 2025 could have lower out-of-pocket costs — including premiums and cost-sharing — and save a median of $2,474. That is a 48% decrease on average of their total out-of-pocket costs, based on the report, which analyzed plan enrollment and premium data, amongst other information. 

That 1 million tally excludes Medicare beneficiaries who receive a certain low-income subsidy and people in employer waiver plans.

An estimated 62% of those 1 million enrollees will save a median of greater than $1,000 in 2025, while 12% will save greater than $5,000, the report said. The remaining 6% of Part D enrollees who’re projected to achieve the brand new cap are expected to have higher out-of-pocket costs, with a median of $268 in additional spending in 2025, the report said. 

Notably, the share of Part D enrollees expected to achieve the cap and have lower total out-of-pocket costs in 2025 is estimated to be 95% or higher in 33 states and Washington, D.C.

“Whenever you’re capable of provide some of these savings, that frees up those funds for other really necessary things that perhaps [patients] were having to make trade-offs for, paying for his or her food or paying for his or her rent,” Leigh Purvis, prescription drug policy principal at AARP, said in an interview. “It’s a extremely meaningful impact, especially for a population that is on a set income.” 

She added that the median income of Medicare beneficiaries is around $36,000 a yr. 

Those savings come despite changes to Part D premiums in 2025, AARP said. Purvis said the brand new prices for the primary 10 medications chosen for Medicare negotiations — and the lower costs expected from them — don’t go into effect until 2026, so premiums have increased in some cases.

She said critics have been trying in charge the law for those premium increases and better costs for Medicare enrollees overall. However the report said the lower out-of-pocket costs for many patients who reach the $2,000 cap will greater than offset higher premiums.

The positive effect “will only grow larger” as latest negotiated prices for the primary round of medication go into effect in 2026, based on the report. 

“The Medicare program goes to be saving a number of money, so this is actually a story that is way larger than it appears, simply because these savings go to a number of different people in a number of alternative ways,” Purvis said. 

A separate report from AARP found that 3.2 million Medicare recipients are expected to see savings from the out-of-pocket cap in 2025. By 2029, the number is predicted to extend to 4.1 million enrollees.

Medicare covers about 66 million people within the U.S., and 50.5 million patients are enrolled in Part D plans, based on 2023 data from health policy research organization KFF.

The brand new price cap applies to all pharmaceuticals under Medicare Part D, but doesn’t include drugs given to patients within the hospital or other health-care settings comparable to anesthesia and chemotherapy. 

Before the change, people on Medicare typically needed to spend $7,000 or more out of pocket on prescription medications before they qualified for so-called “catastrophic coverage,” when insurance kicks in and covers many of the drug’s cost. 

Under this coverage, patients are charged a small co-payment or a percentage of a drug’s cost, normally 5%.