It's a BFD: Starting today, 19 million Medicare enrollees will have their prescription drug costs capped at $2,000/yr, saving an avg. $400/yr apiece!

In August 2022, President Biden signed the Inflation Reduction Act (passed with into law with purely Democratic votes).

While the IRA included a long list of landmark provisions, in addition to the critical upgraded ACA premium subsidies which are unfortunately set to expire at the end of 2025, other healthcare-related ones include:

  • For the first time, requires the federal government to negotiate prices for some of the highest-spending drugs covered under Medicare
  • Requires drug companies to pay rebates if prices rise faster than inflation for drugs used by Medicare beneficiaries
  • Eliminates 5% coinsurance for catastrophic coverage in Medicare Part D in 2024
  • Adds a $2,000 cap on Part D out-of-pocket spending in 2025
  • Limits annual increases in Part D premiums for 2024-2030
  • Limits monthly cost sharing for insulin products to $35 for people with Medicare
  • Expands eligibility for Medicare Part D Low-Income Subsidy full benefits
  • Eliminates cost sharing for adult vaccines covered under Medicare Part D and improves access to adult vaccines under Medicaid and CHIP
  • Further delays implementation of the Trump Administration’s drug rebate rule

I've written some of the other provisions before, but today I want to focus on the fourth bullet above. Here's the details from KFF:

In 2025, Medicare beneficiaries will pay no more than $2,000 out of pocket for prescription drugs covered under Part D, Medicare’s outpatient drug benefit. This is due to a provision in the Inflation Reduction Act of 2022, which included several changes to the Medicare Part D program designed to lower patient out-of-pocket costs and reduce what Medicare spends on prescription drugs. This new $2,000 cap (indexed annually to the rate of change in Part D costs) comes on top of the elimination of 5% coinsurance in the catastrophic coverage phase of the Part D benefit, in effect for 2024, which translates to a cap of about $3,300 out of pocket for brand-name drugs. These benefit design changes will save thousands of dollars for people who take high-cost drugs for cancer, rheumatoid arthritis, and other serious conditions.

...Over the course of several years, however, far more Part D enrollees will stand to see savings from this new out-of-pocket spending cap than in any single 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 between 2012 and 2021, while 6.8 million Part D enrollees have paid $2,000 or more out of pocket in at least one year since 2007, the first full year of the Part D program.

...Capping 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 any given year but, as this analysis shows, a larger number over time. People who will be helped include those who have persistently high drug costs over multiple years and others who have high costs in one year but not over time.

Up to 19 million Medicare Part D enrollees could potentially benefit from the new $2,000/yr drug cap, as noted by President Biden in his official statement on it taking effect:

I believe that health care should be a right – not a privilege – and throughout my presidency I have advanced that goal. This week, we take another step closer to an America where everyone can afford the quality health care they need, as Medicare’s new $2,000 cap on prescription drug costs from my Inflation Reduction Act goes fully into effect.

Before I took office, people with Medicare who took expensive drugs could face a crushing burden, paying $10,000 a year or more in copays for the drugs they need to stay alive. When I took on Big Pharma and won, we changed that, capping seniors’ out-of-pocket spending on drugs they get at the pharmacy for the first time ever. Costs were capped at about $3,500 in 2024, and in just the first six months of the year, this policy saved people with Medicare $1 billion in cost-sharing. On January 1, 2025, the cap on drug costs fully phases in, and costs are now capped at $2,000 per year. As a result, 19 million people are expected to save an average of $400 each. That’s a game changer for the American people.

My Inflation Reduction Act has changed Medicare for the better, and as a result Americans will have more money back in their pockets in the years to come.

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