Medicare Caps Drug Costs at $2,000 Annually Starting 2025, Benefiting 19 Million

Jan 1, 2025, 12:34 AM

A key provision of the Inflation Reduction Act, effective January 1, 2025, caps annual out-of-pocket prescription drug costs at $2,000 for Medicare Part D beneficiaries. This measure is expected to benefit approximately 19 million people, saving them an average of $400 annually. Before this law, there was no cap on out-of-pocket drug costs, leaving many seniors vulnerable to high expenses. An interim cap of $3,500 was in place for 2024. Starting in 2025, insurers will cover 60% of drug costs for enrollees exceeding the cap, with Medicare covering 40% of generic drug costs and sharing brand-name drug costs with manufacturers. The provision also allows beneficiaries to spread payments over the year, offering additional financial flexibility. While the cap does not apply to medications administered in doctors' offices, such as certain chemotherapy treatments, it is part of broader reforms under the Inflation Reduction Act, which also includes a $35 monthly cap on insulin and free vaccines for Medicare enrollees. However, the restructuring of Medicare Part D may lead to potential premium increases for some beneficiaries.