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New year, new savings…at least for some Medicare beneficiaries.
As of January 1, beneficiaries enrolled in Part D prescription drug plans will have their out-of-pocket spending capped at $2,000 for the year. This new policy was part of President Joe Biden’s 2022 Inflation Reduction Act (IRA), which included other drug pricing measures such as capping the cost of insulin at $35 per month for seniors.
But only a small share of Medicare enrollees will benefit from the cap, according to an analysis from nonprofit organization AARP’s Public Policy Institute, as most don’t spend more than $2,000 annually on their medications after hitting their deductible (which is up to $590 for standard plans in 2025). Beneficiaries spent an average of $400 to $500 per year as of 2022, the Hill reported, citing data from the US Department of Health and Human Services (HHS).
By the numbers. Analysts from AARP reported in August that, based on 2022 prescription drug data from the Centers for Medicare and Medicaid Services (CMS), roughly 3.2 million beneficiaries could save money on their prescriptions in 2025 with the spending cap. There were roughly 56 million Part D beneficiaries that year, so that would mean roughly 5.7% of enrollees would benefit from the cap.
However, based on government data from 2024, 4.6 million out of 53.1 million enrollees hit $2,000 by June 30 last year, suggesting that closer to 8.7% of enrollees could benefit.
Who benefits? Of the beneficiaries expected to save money, 1.4 million, or 2.5% of all enrollees in 2022, could save an average $1,000 or more per year starting in 2025, AARP analysts found. And more than 420,000, or 0.8% of total beneficiaries, are expected to save more than $3,000 per year.
The cap is likely to have the most benefit for patients who take expensive medications for conditions like cancer and rheumatoid arthritis, according to KFF. And while it may only help a small percentage of Medicare beneficiaries each year the cap is in effect, a larger number will benefit over time because while some enrollees will have consistently high drug costs each year, others will only occasionally have years when they accrue more than the cap in medication costs, the research firm wrote.
HHS declined to provide Healthcare Brew with additional comment for this story. CMS did not respond to Healthcare Brew’s request for comment by publication.