Important Change to Medicare Part D Prescription Drug Plans: New $2,000 Out-of-Pocket Annual Cap on Covered Part D Prescription Drugs
Overview
Beginning January 1, 2025, Medicare beneficiaries enrolled in Medicare Part D prescription drug coverage (Part D plan) will have their out-of-pocket (OOP) costs for covered prescription drugs filled at an in-network pharmacy capped at $2,000.
Background on Medicare Part D
Medicare Part D is a voluntary outpatient insurance program that offers Medicare beneficiaries the opportunity to purchase prescription drug coverage from a private health insurance company that contracts with the federal government. Part D was created to help people with Medicare access and afford their prescription medications.
Beneficiaries with Original Medicare (Part A and/or Part B) have the option to purchase a “stand-alone” Part D prescription drug plan (stand-alone PDP). Beneficiaries with Medicare Advantage (MA), sometimes known as Part C, have the option to purchase an MA plan that includes Part D prescription drug coverage (MA-PD). In 2024, more than 53 million of the 67 million Medicare beneficiaries were enrolled in a Part D plan. The changes to Medicare Part D discussed below are the result of the Inflation Reduction Act of 2022 (IRA).
New Out-of-Pocket Cap on Medicare Part D Covered Prescription Drugs
For the first time since Medicare Part D was created, the IRA requires all Medicare Part D plans to cap (limit) the amount a beneficiary enrolled in a Part D plan pays out-of-pocket (OOP) in a single year for prescription drugs covered under their Part D plan. In 2025, the annual OOP cap for Part D-covered prescription drugs will be $2,000 per beneficiary. This cap applies to prescription drugs covered in a stand-alone PDP and prescription drugs covered in an MA-PD that are filled at an in-network pharmacy (unless an out-of-network pharmacy exception applies). Since the prescription drugs covered by a Part D plan (stand-alone PDP or MA-PD) can change from year to year, it’s important for enrollees to use the Medicare open enrollment period to review and compare their Part D plan (and any changes being made to it) with other Part D plans offered for the new year. This review and comparison will help enrollees determine which Part D plan will best meet their current and any anticipated prescription drug needs in the new year. Links to the Medicare website and Medicare resources are included below.
Medicare’s open enrollment period for 2025 begins on October 15, 2024, and goes through December 7, 2024.
Elimination of 5% Cost-Sharing in the Catastrophic Phase
In addition to requiring an annual OOP cap for prescription drugs covered in Part D plans, in 2024 the IRA also eliminated the 5% patient cost-sharing for prescription drugs purchased in the catastrophic phase of Part D. Although 5% cost-sharing was a lower percentage than what enrollees paid for prescription drugs in other phases of Part D, without an annual cap, the 5% cost-sharing in the catastrophic phase quickly added up and often became unaffordable for patients treating serious conditions like cancer.
Summary
In 2025, Medicare beneficiaries enrolled in a Part D prescription drug plan (stand-alone PDP or MA-PD) will owe no more than $2,000 in OOP costs for prescription drugs covered in their Part D plan filled at an in-network pharmacy. Effective 2024, the IRA eliminated the 5% patient cost-sharing requirement for prescription drugs purchased in Part D’s catastrophic phase. These changes are important victories for Medicare Part D enrollees – especially those who rely on high-cost and/or multiple prescription drugs to treat their condition.
Additional Resources
New Annual Cap for Medicare Part D Drugs - Information for Patients (one pager)
Welcome to Medicare | Medicare
Medicare and You Handbook 2025
Inflation Reduction Act and Medicare | CMS
This guest blog post was written by Kim Czubaruk, JD, CancerCare's Associate Vice President of Policy.