More than a million patients older than 65 got what may have been a significant financial surprise at the start of the new year. They may find this little-known part of their Medicare coverage will be even bigger in 2025.
As part of the Inflation Reduction Act (IRA) that became law in 2022, federal rules affecting senior drug coverage, aka Medicare Part D, changed.
Starting in 2024, as the New York Times reported, “an annual out-of-pocket cap of $3,300 will take effect, because people covered under Part D are no longer required to pay 5% of the cost of brand-name drugs once they reach that level of spending. Another provision penalizes drug companies for price increases that exceed the rate of general inflation. And the [law] expands eligibility for financial assistance with Part D costs for low-income seniors.”
Before digging into what all this means, the newspaper also reported this:
“In 2025, there will be two more important changes: A beneficiary’s total out-of-pocket spending will be capped at $2,000, and people will be able to spread their out-of-pocket costs throughout the year by setting up a monthly payment plan with their Part D insurance companies.”
Here’s the financial bottom line for these changes, as the New York Times noted:
“The new caps on out-of-pocket costs will save thousands of dollars for those who take high-cost drugs for conditions such as cancer and multiple sclerosis. In many cases, Medicare beneficiaries have been paying tens of thousands for their medicines. In 2020, 1.4 million people who didn’t receive a low-income subsidy had annual out-of-pocket costs of $2,000 or more, according to KFF, which focuses on health policy. ‘The prescription drug reforms in this law mark the most substantial changes to the Medicare D program since the drug benefit launched in 2006,’ said Tricia Neuman, senior vice president of KFF.”
KFF, a nonprofit, nonpartisan foundation focusing on healthcare issues, has found in its public opinion polling that few seniors or Americans in general knew about or understood the potentially dramatic savings that patients will experience because of recent Medicare rule changes.
For 1 million or more individuals, these can amount to hundreds or even thousands of dollars annually, with one consumer group reporting a patient had $15,000 more in his pocket due to the changes. A family member of a friend of this newsletter saw a $9,000 savings this year and anticipates more in ’25, a big burden lifted in paying for cancer care.
The rule changes also boosted federal aid for the Part D plans for older patients with lower incomes, the New York Times reported.
KFF has posted online a detailed description of the Medicare changes, as well as its expert analyses on how they affect federal spending and individuals, and how programs will roll out. Patients can check with their doctors, hospitals, and insurers to see how they might benefit from the medication-cost cap. (They should have seen some of its benefits already). It also may be worth checking how the increased benefit in ’25 might result in further savings. It never hurts to get a little good news, right?
Yes, but … Advocates may have won some recent battles on behalf of older patients in the Medicare program. But much more work still must be done.
For context, seniors take more prescription drugs than others, with KFF finding that “more than half of adults 65 and older (54%) report taking four or more prescription drugs compared to one-third of adults 50-64 years old (32%) and about one in 10 adults 30-49 (13%) or 18-29 (7%).”
Seniors also fork over more money for drugs. A health policy institute at Georgetown University reported that “annual average out-of-pocket prescription drug expenditures for all adults are $177, but people age 65 and older pay much more for their medications. People aged 65 to 79 pay $456 out-of-pocket. People aged 80 and older pay even more.”
Affordability issues affect significant numbers of us all, KFF has found in its regular medical care opinion surveys. They show that one in five respondents reporting that they have not filled a prescription or took an over-the counter drug instead (21%), and 12% who say they have cut pills in half or skipped a dose because of the cost.