CMS utilization reports

Medicare's $2,000 Drug Cost Cap Begins January 1, 2024 Under Inflation Reduction Act

Dec 31, 2024, 12:10 PM

The $2,000 annual cap on out-of-pocket prescription drug costs for Medicare Part D beneficiaries will take effect on January 1, 2024, as part of the Inflation Reduction Act. This cap, designed to reduce financial burdens for seniors, is expected to benefit millions of Americans, with over 3 million enrollees projected to save money in 2025. The law also includes other measures such as a $35 monthly insulin cap, free vaccines for Medicare beneficiaries, and provisions allowing Medicare to negotiate drug prices. Previously, there was no cap on out-of-pocket costs, and beneficiaries faced significant expenses in the catastrophic coverage phase, which had an interim cap of $3,500 in 2024. Medicare Part D covers approximately 53 million beneficiaries. While the cap offers financial relief, insurers are expected to bear more costs, potentially leading to higher premiums. The Biden administration has allocated $5 billion in subsidies to mitigate premium increases. The cap does not apply to medications administered in doctors' offices under Medicare Part B.