Starting January 1, millions of Americans on Medicare will get a big break on prescription drug costs. A new rule will limit out-of-pocket spending on medications to $2,000 per year. This change is part of the Inflation Reduction Act signed into law by President Joe Biden in 2022, which aims to reduce drug costs for seniors and other Americans.
Some parts of this law, like a $35 cap on insulin for seniors, have already taken effect. But the $2,000 cap on Medicare prescription drug costs will start next month. This is expected to help about 3.2 million Medicare recipients, especially seniors who take many medications or have expensive prescriptions.
Before this law, there was no limit on how much seniors could spend on their Part D medications, which led to high out-of-pocket costs. The new cap will make it easier for people to plan their health care expenses.
Who is covered by the $2,000 cap?
The $2,000 cap applies to everyone with a Medicare Part D plan, which covers most prescription drugs. It also includes people with Medicare Advantage plans, which are private health plans that also offer drug coverage. Over 50 million older Americans have either Part D or Medicare Advantage plans.
Will the “donut hole” still exist?
No. The “donut hole,” a gap in drug coverage that forced seniors to pay more out-of-pocket until they reached a certain spending threshold, will end by December 31, 2024. This gap currently happens when a person’s drug costs reach around $5,030, leaving them to pay full prices until they hit $8,000 in spending. After that, catastrophic coverage kicks in to help with further costs.
Which drugs are covered by the $2,000 cap?
The $2,000 cap covers prescription drugs listed in your Medicare Part D plan’s formulary, which is a list of approved medications. If a doctor prescribes a drug that isn’t on your plan’s formulary, it won’t be included in the cap, so you may have to pay more for it.
Medicare enrollees can ask their doctor to prescribe drugs that are on the formulary, or they can request an exception for medically necessary drugs not listed.
Since formularies can change each year, it’s important to check your Part D plan during open enrollment (which usually runs from mid-October to early December) to make sure your plan still meets your needs.
Do I need to sign up for the $2,000 cap?
No, the $2,000 cap will automatically apply to your Part D plan. Your plan will keep track of your spending, and once you hit the $2,000 limit, it will start covering the rest of your eligible drug costs for the year.
What costs are included in the $2,000 cap?
The $2,000 cap will cover the costs of drugs on your Part D formulary, as well as your deductible, copayments, and coinsurance for those drugs. However, it does not cover:
- Drugs outside of your Part D plan (such as those covered under Medicare Part B, like injectable drugs given at a doctor’s office)
- Your Part D premiums
This change is expected to help many seniors manage their health care costs better. Before this cap, some people had to choose between buying prescriptions and other necessities like groceries.
In short, the new cap will be a relief for many, helping to reduce the financial burden of expensive medications.