Two of the biggest stories this fall may focus on new benefits, starting on Jan. 1, for older adults enrolled in Medicare Part D prescription drug plans.
First is a $2,000 limit on out-of-pocket spending for prescription drugs. Those with Part D (prescription drug) plans will pay no more than $2,000 in copayment or coinsurance starting next year. This new limit is a significant reduction from the $3,500 cap in place this year.
Second is a prescription drug payment plan. In 2025, everyone in Part D plans can spread their prescription drug costs over monthly payments throughout the year, rather than paying all at once at the pharmacy early in the year. There’s a catch, however: Enrollees need to ask their Part D insurers about this benefit because they will need to opt-in to get capped monthly payments. Previously, Medicare had not implemented such a measure, A. Mark Fendrick, M.D., director of the Center for Value-Based Insurance Design at the University of Michigan, said in an email.
In addition to these two provisions in the Inflation Reduction Act (IRA) of 2022, there’s more. For example, the IRA set a cost-sharing limit on insulin at $35 each month for Medicare members, eliminated cost-sharing for adult vaccines covered under Part D and improved access to those vaccines in Medicaid and CHIP.
Why this matters
The most significant provision in the IRA allows the Medicare agency to negotiate prices directly with drug companies for the 10 most expensive drugs that physicians dispense under Medicare Part B and that patients get at pharmacies under Part D. The negotiated prices will be in effect for certain Part D medications in 2026 and for Part B drugs in 2028, according to this report from KFF.
That drug-price negotiation provision was historic because it was the first to allow Medicare to negotiate drug prices since the Medicare Prescription Drug and Modernization Act was passed in 2003, as we reported in August and in September.
Once the Trump administration takes office in January, health care journalists will need to watch whether Congress will move to eliminate or cripple the most significant IRA provision. Shannon Firth covered this issue Wednesday (Nov. 7) for MedPage Today, asking, “Is price negotiation in the next administration’s crosshairs or is it ‘political suicide’”? Experts agree that repealing the entire law would be difficult, she wrote.
“I don’t think there’s any upside to Republicans saying they’re going to repeal the IRA, because that means repealing the cap on out-of-pocket [costs], and that is political suicide,” Firth wrote, quoting Douglas Holtz-Eakin, president of the American Action Forum and the former director of the Congressional Budget Office.
Fendrick also commented. “One of foremost health policy challenges facing the next Trump administration will be striking a balance between retaining the law’s elements that align with the President-elect’s agenda — to lower prescription drug costs for Medicare beneficiaries — and addressing those features it opposes, such as Medicare drug price negotiation,” he wrote.
Out of pocket cap helps 1.5 million
This year, the $3,500 cap helped almost 1.5 million seniors with Part D plans save almost $1 billion in out-of-pocket spending for drugs through June, according to a report from the federal Department of Health and Human Services (HHS) in October. Next year, the $2,000 cap is expected to save 19
million seniors $7.4 billion in out-of-pocket costs, HHS added. Before the IRA, there was no limit on out-of-pocket drug costs for Medicare enrollees and some of the most expensive drugs could cost seniors $60,000 per year, the report noted.
Kristen Jordan Shamus, who covers health care for the Detroit Free Press, explained that the $2,000 cap on out of pocket costs applies only to the prescription drugs that each member’s Part D plan lists on its formulary. A formulary is the list of covered drugs and each Part D plan lists different drugs on its formulary, she added. “If you are taking a prescription drug that isn’t included in your Medicare Part D plan’s formulary, you will have to pay the full cost of that drug,” she added. “The $2,000 out-of-pocket cap won’t apply.”
One final note that may be important going forward is that the Democrats in Congress passed the act with no Republican votes. Here is the vote tally in the House of Representatives and in the Senate. Following that vote, many Republicans took credit for the provisions in that bill.
Resources
- Medicare Part D Enrollees Reaching the Out-of-Pocket Limit by June 2024, HHS report Oct. 22.
- A Current Snapshot of the Medicare Part D Prescription Drug Benefit, KFF, Oct. 9, 2024.
- Allowing Medicare to Negotiate Drug Prices Remains Broadly Popular Among Voters, Though Most Are Unaware of the Law and Its Projected Savings, KFF news release, Sept. 13, 2024.
- FAQs about the Inflation Reduction Act’s Medicare Drug Price Negotiation Program, KFF, Aug. 20, 2024.
- Explaining the Prescription Drug Provisions in the Inflation Reduction Act, KFF, Jan. 24, 2023.
