Those with Medicare are gonna get relief from high prescription drug costs as annual out-of-pocket costs will be capped at $2,000 in 2025!
Starting January 2025, Medicare drug plan enrollees will see their yearly out-of-pocket costs for prescription medications capped at $2,000. This change is a significant relief for many people concerned about high drug expenses.
From 2025 to 2029, 3.2 million enrollees with Medicare Part D (the prescription drug coverage plan) are estimated to benefit from this new out-of-pocket cap, with this number increasing to 4.1 million by 2029. On average, 1.4 million people will save about $1,000 or more per year, according to the recent report by AARP. Furthermore, over 420,000 of these beneficiaries will see savings exceeding $3,000 during this period.
In 2025, retirees who hit the $2,000 out-of-pocket cap will spend around $1,100 on medications, a substantial decrease from the current average of $2,600. This represents a 56% reduction in expenses related to medication, as highlighted by AARP.
“That’s money that can be used instead to buy groceries and pay bills”, said Nancy LeaMond, AARP’s Executive Vice President and Chief Advocacy and Engagement Officer, during a recent presentation on the study’s findings.
Legislative Changes Driving Cost Reductions
The reduction in prescription drug costs comes as a result of the 2022 Inflation Reduction Act, which introduced several measures to lower medication expenses for Medicare recipients. One significant change is the introduction of the out-of-pocket cap, but the legislation also empowers Medicare to negotiate prices for certain prescription drugs. Earlier this month, the Biden administration announced the first 10 drugs selected for these price negotiations.
Before the Inflation Reduction Act, Medicare Part D enrollees often faced high costs, paying 5% of their drug expenses with no upper limit even after reaching a spending threshold and entering catastrophic coverage. This could result in annual out-of-pocket expenses exceeding $10,000, causing some retirees to skip medications or reduce doses, as AARP reported.
“This is about real people, parents, grandparents, friends, and neighbors who will finally see relief from high drug costs, and the fear that the price of their medications will spiral out of control”, LeaMond said.
Additionally, thanks to the 2022 law, Medicare beneficiaries are already seeing benefits, such as paying no more than $35 per month for insulin and receiving certain vaccines at no cost, according to LeaMond.