Most Medicare patients who reach the new $2,000 cap on out-of-pocket spending for prescription drugs may experience significant savings, as per a report released by AARP on Thursday.
The report indicates that the cap could greatly benefit older adults in Medicare who struggle to afford expensive drugs for conditions like cancer and rheumatoid arthritis. Seniors and other U.S. patients typically pay two to three times more for prescription drugs compared to individuals in other developed countries.
The cap, which became effective at the start of this year, is a key provision in President Joe Biden’s 2022 Inflation Reduction Act. It aims to reduce high drug costs, along with implementing a new $35 monthly cap on insulin and initiating Medicare drug price negotiations with manufacturers.
The report reveals that 94% of over 1 million Medicare Part D enrollees projected to hit the new cap in 2025 will experience reduced out-of-pocket costs, saving an average of $2,474. This represents a 48% average decrease in their total out-of-pocket expenses. The analysis considered plan enrollment, premium data, and other relevant information.
Excluded from the 1 million count are Medicare beneficiaries receiving a specific low-income subsidy and those in employer waiver plans.
Approximately 62% of these 1 million enrollees are expected to save over $1,000 in 2025, with 12% saving more than $5,000. The remaining 6% are anticipated to face higher out-of-pocket costs, averaging $268 in additional spending in 2025.
In 33 states and Washington, D.C., it is estimated that 95% or more of Part D enrollees projected to reach the cap will have lower total out-of-pocket costs in 2025.
Leigh Purvis, AARP’s prescription drug policy principal, highlighted the significance of these savings, emphasizing the impact on a fixed-income population. She noted that the median income of Medicare beneficiaries is approximately $36,000 annually.
Despite changes to Part D premiums in 2025, AARP mentioned that the savings persist. Purvis clarified that the new prices for the first 10 medications selected for Medicare negotiations, and the subsequent cost reductions, will not take effect until 2026, leading to premium increases in some cases.
Critics attributing premium hikes and increased costs to the law were addressed in the report, which stated that the lower out-of-pocket costs for most patients reaching the $2,000 cap will outweigh higher premiums.
The report anticipates a growing positive impact as new negotiated drug prices come into effect in 2026, leading to substantial savings for the Medicare program and its beneficiaries.
Another AARP report forecasts that 3.2 million Medicare recipients will benefit from the out-of-pocket cap in 2025, with an expected increase to 4.1 million enrollees by 2029.
Medicare, covering around 66 million individuals in the U.S., includes 50.5 million patients enrolled in Part D plans, based on 2023 data from the health policy research organization KFF.
The new price cap applies to all prescription drugs under Medicare Part D, excluding drugs administered in hospital or other healthcare settings like anesthesia and chemotherapy.
Previously, Medicare beneficiaries typically had to spend $7,000 or more out of pocket on prescription medications before qualifying for catastrophic coverage, where insurance covers most of the drug costs, with patients paying a small co-payment or a percentage of the drug’s cost, usually 5%.
