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What you need to know about the new Medicare Part D drug out-of-pocket cap

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There is still an open registration period for the approx. 2.2. Millions of Michiganders have Medicare, and it's more important than ever to choose wisely when it comes to Medicare Part D prescription drug plans.

Through December 7, people age 65 and older and younger Americans who are eligible for Medicare coverage due to a disability, end-stage renal disease or amyotrophic lateral sclerosis can choose their 2025 health insurance coverage—whether it is a Medicare Advantage plan. Plan or a Medicare Advantage plan is original Medicare plan. You can also add or remove a Part D prescription drug plan or switch Part D plans. The insurance plans chosen now will come into effect in January.

What's new with Medicare Part D?

What's new in 2025 is a $2,000 cap on out-of-pocket prescription drug costs for people enrolled in Medicare Part D, which could save some people thousands of dollars.

“The leading cause of personal debt in this country, the leading cause of personal bankruptcies in this country and the leading cause of online fundraising in this country is healthcare,” Dr. Mark Fendrick, a family physician. He is also a professor at the University of Michigan and director of the UM Center for Value-Based Insurance Design.

“So let’s celebrate the $2,000 out-of-pocket maximum. One-third of Medicare beneficiaries will have $7 billion in out-of-pocket savings. … As President Joe Biden would say, this is a very, very BFD,” Fendrick said, referencing a heated comment Biden made in 2010 when former President Barack Obama signed the Affordable Care Act into law, and called it a “big f—— deal.”

How did Medicare Part D become a reality?

The $2,000 annual out-of-pocket limit for Part D plans is part of the Inflation Reduction Act, which Biden signed into law in 2022. He made recommended vaccines like Shingrix to prevent shingles free for people with Medicare and negotiated lower prices for 10 drugs that were among the most expensive in the Medicare program. These medications include insulin to treat diabetes, blood thinners to prevent blood clots, and a drug to treat leukemia and lymphoma, as well as to treat autoimmune arthritis, psoriasis, Crohn's disease, and ulcerative colitis.

The federal government will continue to negotiate prices for up to 60 drugs covered by Medicare Part D and Part B over the next three years, and for up to 20 additional drugs each year thereafter. The law also requires pharmaceutical companies to offer discounts if the prices of certain drugs exceed the inflation rate.

How does the cap work under Medicare Part D?

While the new prescription drug cap for people with Part D plans will likely save many people more money in 2025 and beyond, it's important to understand how it works before choosing a plan.

Only prescription drugs listed in the plan's formulary or in the list of covered drugs are subject to the out-of-pocket cap. And every Part D plan is a little different in which prescription drugs are included in the formulary.

If you take a prescription drug that is not included in your Medicare Part D plan's formulary, you must pay the full cost of that drug. The $2,000 out-of-pocket limit does not apply.

How do you compare Medicare plans?

It's important to carefully review the list of approved medications in each plan's formulary before committing to one, Dr. Kristian Stensland, urologic oncologist and assistant professor at UM.

“Even though we have these caps that help people, there are still differences in how much people have to pay,” he said. “During this open enrollment period, people who are eligible for Medicare will be able to select their plan and switch to other Part D coverage. This can be confusing because there are many plans available. But there is this really easy-to-use plan.” The tool published by Medicare called Plan Compare: www.medicare.gov/plan-compare.

“It's a simple website where you enter your zip code and the pharmacies near you. Plus, you enter the medications you are taking and it walks you through what you expected. The costs are for the coming year and this will help you choose the best plan for you.

If this is confusing, Stensland recommends calling your doctor's office and asking for additional help and advice.

“Give us a call and we can try to explain how this all works so you can get a better feel for it: Do I have the right plan? What other plans are available? Patients can potentially save hundreds, if not thousands, of dollars per year,” he said.

The Michigan Medicare Assistance Program also has certified counselors trained to provide free assistance by calling 800-803-7174. His advisors can also:

  • Check insurance needs, compare policies and help people make claims and refunds.
  • Help people understand medical bills from doctors and hospitals.
  • Determine eligibility, explain how to enroll in Medicare plans, determine how coverage works, what it costs, and explain how to file claims and appeals.
  • Help people enroll in Medicare savings programs.

If the cap of $2,000 out of pocket is still too expensive

While the cap is likely to provide financial relief for some Americans, it is still a budget bust for others.

“While $2,000 may not be a lot for some, for people on fixed incomes it is a lot,” Fendrick said. “The Federal Reserve said 40% of Americans don’t have $500 in the bank. While reducing the cost of prescription drugs from $6,000 to $2,000 is a blessing, if you can't afford $2,000, it's still a problem.”

For Americans earning less than $22,590 per year for an individual or $30,660 for a married couple, the federal government offers the Extra Help program to help offset the burden of Medicare Part D costs such as premiums, Reduce deductibles and cost sharing. To learn more about Extra Help, go to Medicare.gov/extrahelp or call 800-633-4227.

There is also an option called the Medicare Prescription Payment Plan (MPPP) for people who enroll in a Medicare prescription drug plan, including Part D plans and Medicare Advantage plans with prescription drug coverage.

“It allows people to spread their $2,000 over the year, so they can sign up and pay no more than $167 a month,” Fendrick said, for all of their prescription medications for the year.

But there's a catch. You must enroll in the Medicare prescription payment plan to receive it. “With the $2,000 deductible maximum for Part D, anyone with Medicare Part D can get it. But with the MPP plan, you have to choose it. “Now that people are starting to get their open enrollment packages, you need to opt into the program if you want to spread your prescription drug costs throughout the year.”

This opt-in gap, Fendrick said, is a cause for concern.

“I am very concerned about underserved populations, people who are medically illiterate, people in Black and brown communities, people with multiple chronic illnesses or disabilities – the people who really need the MPP the most,” Fendrick said. “I’m worried they won’t sign up.

“There are still a significant number of seniors, particularly those enrolled in Part D, who … either cannot afford their prescription medications or, if they do purchase their prescription medications, forego other essentials such as rent and healthy foods, etc . forego… These are people who receive low income subsidies… but will fall through the cracks and still have trouble paying $167 a month.”

What other support is out there?

There is additional support from charities like the Patient Assistance Network Foundation that could help ease the financial burden of prescription drug costs.

Stensland, whose work has largely been in advanced prostate cancer research, said drug affordability has been a key issue. In recent years, the cost of many cancer drugs has fallen, he said.

“For certain drugs, particularly for advanced prostate cancer, but also for many other cancers, the maximum prices have fallen from over $10,000 per year to … about $3,500 out of pocket.”

The $2,000 out-of-pocket cap, which goes into effect next year, will hugely benefit cancer patients who need these drugs, he said.

“For some drugs, that’s a huge amount – $8,000, $9,000, $10,000. And even for drugs with smaller variations, especially when everything else is getting so expensive, it's actually a savings of a few hundred to a few thousand dollars a year.” “It's a huge, huge help for patients,” Stensland said.

“If we can help patients struggling with incredibly stressful cancer treatment, we must try to minimize that aspect of the stress they have trying to figure out how to pay for it. They need to be able to deal with the cure and treatment of their cancer.

“If we can almost automatically put caps on how much they have to pay out of pocket, that should alleviate some of that stress.”

The key, he said, is making sure people understand which Medicare Part D plan they choose and evaluating the one that best meets their needs.

“Especially when you have cancer, it's important to realize that there are people who can help you and that there are also free and easy tools that can help you deal with these things and hopefully relieve some of the stress Stensland said.

“There are definitely counselors and other resources focused primarily on the cancer centers. This is another resource.”

Contact Kristen Shamus: [email protected]. Subscribe to the Free Press.

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