More Than 3 Million Older Americans Will See Rx Savings With Out-of-Pocket Cap

More than 1 million will save $1,000-plus from new cap

The amount of money each person will save under the new law will vary depending on the medications a person takes and how much they have to pay for them. An estimated 1.4 million adults with a Medicare prescription drug plan who reach the new out-of-pocket cap between 2025 and 2029 are expected to see an average annual savings of $1,000 or more, the AARP report shows. More than 420,000 Medicare Part D enrollees will save $3,000-plus.

Sandy Hankin, of Sunrise, Florida, has tried a few different medications to help manage her diabetes and recently started taking a drug that she says has done wonders for her condition. But the new medication and others she was taking before it — all with a list price of around $1,000 a month — put her in Medicare’s coverage gap, sometimes still referred to as the “donut hole,” that was part of the original Part D benefit. Through the end of this year, the 73-year-old retired attorney expects to pay a lot more in out-of-pocket expenses to fill her medication.

Hankin says knowing that the $2,000 cap goes into effect in 2025 was part of her “thought process” when discussing with her doctor whether she should start taking the drug to help her worsening diabetes. “Knowing that next year it will be so much less out of pocket, it’ll be less of an issue,” she says. 

A closer look at who will save

Most Medicare enrollees expected to benefit from the spending limit are between 75 and 84 (45.6 percent) or between 65 and 74 (29.8 percent).

Savings from the new cap vary across states. In Irwin’s home state of Tennessee, 53,942 people with Medicare Part D plans who do not receive the program’s low-income subsidy are expected to hit the $2,000 out-of-pocket cap in 2025 — that’s 6.4 percent of beneficiaries with a prescription drug plan, according to the new AARP report. In Hankin’s Florida, 203,518 Medicare enrollees will benefit from the new rule — roughly 7 percent of the population with a Part D plan.

Meanwhile, more than 18 percent of Alaska’s Medicare population is expected to reach the prescription drug cap in 2025 — a share that grows to 20.2 percent in the next four years. By 2029, the share of people with Medicare drug plans, not including those with a low-income subsidy, who benefit from the new out-of-pocket cap will be at least 10 percent in 19 states plus the District of Columbia.

“AARP was instrumental in Congress passing the prescription drug law of 2022 to lower prices and out-of-pocket costs for Medicare enrollees,” AARP CEO Jo Ann Jenkins said in a statement. “As we approach January 2025, we want every senior in America to know that, thanks to the new annual cap which limits their out-of-pocket costs, they will have more money to invest in their families, spend on their broader health needs or simply save to achieve greater financial stability.”

More ways to save

The annual out-of-pocket cap is just one part of the 2022 law that helps to make prescription medications more affordable for older adults. The law also limits insulin costs for Medicare beneficiaries to $35 a month and, for the first time ever, gives Medicare the power to negotiate with manufacturers for lower prices for certain high-cost prescription drugs.

The negotiated prices for the first 10 drugs selected by Medicare take effect in 2026, and they are expected to save Medicare Part D enrollees a collective $1.5 billion in out-of-pocket expenses in that first year.

Mary Beth Koeth

What’s more, the law has expanded eligibility for Medicare Part D’s low-income subsidy, or Extra Help program, and it has required drug companies to pay a rebate to Medicare whenever their prices rise faster than the rate of inflation.

“By addressing prescription drug costs and the high prices that are driving them, this law will result in substantial savings for older Americans and taxpayers who help fund the Medicare program,” Purvis says.  

With the extra money he’s set to save in 2025, Irwin says he might go out to eat with his wife more than he does now — “and probably eat better things when I do eat out,” he adds. “Medical costs have reduced our lifestyle,” says Irwin, who explains that he and his wife don’t spend on niceties like golfing or going to the movies, and they downsized to a two-bedroom apartment in a 60-plus-year-old building to save money.

Despite these sacrifices, Irwin considers himself fortunate that he’s been able to pay for his medications. “I'm probably more concerned about others than I am me,” he says.