Millions of People with Medicare Will Benefit from the New Out-of-Pocket Drug Spending Cap Over Time | KFF

In 2025, Medicare beneficiaries will pay no more than $2,000 out-of-pocket for prescription drugs covered by Medicare. Part D, the Medicare outpatient drug benefit. This is due to a provision in the Inflation Reduction Act of 2022which included several changes to the Medicare Part D program designed to reduce patients' out-of-pocket costs and reduce what Medicare spends on prescription drugs. This new $2,000 limit (indexed annually to the rate of change in Part D costs) is in addition to the elimination of the 5% coinsurance in the catastrophic coverage phase of the Part D benefit, effective in 2024, which translates to an out-of-pocket limit of approximately $3,300 for brand-name medications. These changes in benefit design save thousands of dollars for people taking high-cost medications for cancer, rheumatoid arthritis, and other serious conditions.

If a $2,000 limit on out-of-pocket drug spending had been set in 2021, 1.5 million Medicare beneficiaries enrolled in Part D plans would have saved money because they spent $2,000 or more out-of-pocket on prescription drugs that year. This estimate is based on KFF's analysis of Medicare Part D prescription drug claims data for low-income non-subsidized Part D enrollees in 2021 (the most recent year available for this analysis). Among these 1.5 million members, the majority (1.0 million or 68%) spent between $2,000 and $3,000 out of pocket, while 0.3 million (20%) spent between $3,000 and $5,000, and 0.2 million (12%) spent $5,000 or more. pocket-size.

However, over the course of several years, many more Part D enrollees will be able to see savings from this new out-of-pocket limit than in any year. A total of 5 million Part D enrollees had out-of-pocket drug costs of $2,000 or more in at least one year during the 10-year period from 2012 to 2021, while 6.8 million Part D enrollees paid $2000 or more out of pocket. in at least one year since 2007, the first full year of the Part D program (Figure 1).

In most states, tens of thousands, if not hundreds of thousands, of Medicare beneficiaries will find relief from the new Part D out-of-pocket limit (Table 1). In California, Florida, and Texas, more than 100,000 Part D enrollees faced out-of-pocket costs of $2,000 or more in 2021, and in 6 other states (New York, Pennsylvania, Ohio, Illinois, North Carolina, and New Jersey), between 50,000 and 82,000 did so. As at the national level, over time more Part D enrollees in each state will benefit. For example, in Iowa, Louisiana, and Maryland, 73,000 Part D enrollees faced out-of-pocket costs of $2,000 or more in at least one year between 2012 and 2021. In Michigan, New Jersey, and Georgia, 148,000, 158,000, and 159,000 Part D enrollees, respectively, spent $2,000 or more in at least one year during this same 10-year period. In Texas, 364,000 Part D enrollees did so; in Florida and California, around 400,000 or more registered.

Limiting out-of-pocket spending will help Part D enrollees with relatively high drug costs, which may include only a relatively small number of Part D enrollees in a given year but, as this analysis shows, a larger number with the time. People who will get help include those who have persistently high drug costs over several years and others who have high costs in one year but not over time. While a cap on out-of-pocket costs will help millions of Part D enrollees over time, higher plan costs to provide the Part D benefit could also mean higher plan premiums, a dynamic that the Act Reduction of Inflation premium stabilization provision was designed to mitigate. Although KFF survey shows that a relatively small share of older adults are aware of the Billion Reduction Act's $2,000 cap on out-of-pocket drug costs for Part D enrollees, which takes effect in 2025, millions of them will benefit of this limit in the years to come.