Medicare Beneficiaries Could See Significant Prescription Drug Savings in 2025

Millions of Medicare beneficiaries may experience substantial reductions in out-of-pocket prescription drug costs next year as a growing number of baby boomers reach their spending threshold.

Medicare Part D Expansion

Under Medicare Part D, beneficiaries are protected from paying more than $2,000 annually for out-of-pocket prescription drugs, including high-cost medications for serious health conditions like cancer, rheumatoid arthritis, and diabetes. This provision, expanded in President Joe Biden’s 2022 Inflation Reduction Act, primarily benefits individuals over the age of 65.

Anticipated Relief

According to an analysis by KFF (formerly the Kaiser Family Foundation), over a million more Medicare beneficiaries could benefit from the spending cap in 2025. This forecast comes amidst expectations that prescription drug costs will be a significant concern for voters in the upcoming 2024 presidential election.

Public Support for Lowering Drug Costs

Public sentiment strongly favors addressing the issue of prescription drug affordability. Polls conducted by the Progressive Change Institute reveal overwhelming support for measures to reduce prescription drug costs and cap out-of-pocket expenses, particularly for essential medications like insulin. Healthcare affordability, inflation, and Medicare/Medicaid funding are also cited as top priorities by a majority of voters.

Impact of the Spending Cap

In 2023, approximately 50.5 million Medicare beneficiaries were enrolled in Part D plans, with a total of 65 million enrolled in Medicare overall. Prior to the implementation of the spending cap, many boomers faced significant out-of-pocket expenses for prescription drugs.

Regional Distribution of Benefits

States with large populations of Medicare beneficiaries, such as California, Florida, Texas, New York, and Pennsylvania, are expected to see the most significant benefits from the spending cap. Analysis of Medicare claim data indicates that beneficiaries in these states have historically incurred high out-of-pocket costs for prescription drugs.

Long-Term Benefits for Chronic Conditions

The spending cap is particularly advantageous for individuals with chronic health conditions, providing relief for those with persistently high drug costs over multiple years. As more beneficiaries reach the $2,000 payment threshold, the impact of the cap is expected to expand over time.

Mitigating Premium Increases

While there is a concern that increased utilization of the $2,000 out-of-pocket cap could lead to higher plan premiums, provisions in the Inflation Reduction Act aim to stabilize premiums and ensure plan affordability. Additionally, drug companies are now required to pay rebates or offer partial refunds to Medicare and Medicaid on any drug price increases exceeding the rate of inflation.

Ongoing Medicare Reforms

Recent changes to Medicare, including the $35 cap on insulin prices and negotiations on the sale price of other drugs, reflect ongoing efforts to address prescription drug affordability and enhance access to essential medications for Medicare beneficiaries.