Medicare’s New Prescription Drug Law: What It Means for You
Changes to Medicare’s Drug Benefit
When Pam McClure learned she’d save nearly $4,000 on her prescription drugs next year, she said, "it sounded too good to be true." She and her husband are both retired and live on a "very strict" budget in central North Dakota. By the end of this year, she will have spent almost $6,000 for her medications, including a drug to control her diabetes.
Out-of-Pocket Spending Cap
As of 2025, the Biden administration’s 2022 Inflation Reduction Act will cap out-of-pocket medication costs at $2,000 for about 3.2 million people with Medicare prescription drug insurance, according to an Avalere/AARP study. "It’s wonderful — oh my gosh. We would actually be able to live," McClure said. "I might be able to afford fresh fruit in the wintertime."
Medicare Advantage and Prescription Drug Plans
The annual enrollment period for Medicare beneficiaries to renew or switch drug coverage or choose a Medicare Advantage plan began October 15 and runs through December 7. Medicare’s stand-alone drug plans, which cover medicines taken at home, are administered by private insurance companies.
What’s Changing with the IRA
Improvements to Medicare drug coverage required by the IRA are the most sweeping changes since Congress added the benefit in 2003, but most voters don’t know about them. The law will:
- Cap Medicare copayments for most insulin products at no more than $35 a month
- Allow Medicare to negotiate prices of some of the most expensive drugs directly with pharmaceutical companies
- Eliminate the "donut hole," which suspends coverage just as people face growing drug costs
- Increase eligibility for "extra help" subsidies for about 17 million low-income people in Medicare drug plans
- Require drug companies to chip in to help pay for it
What to Expect in 2025
- Most Part D insurers agreed to limit premium increases to no more than $35 a month as part of a demonstration program to cushion the price shock
- Premiums will be lower for many plans, with an average decrease of $1.63 a month
- Some plans may still increase premiums, but many insurers have reduced the number of plans they offer
- Instrument companies will be required to calculate a monthly bill for beneficiaries, which will be adjusted if drugs are added or dropped
Conclusion
The IRA’s changes to Medicare’s drug benefit will have a significant impact on seniors and people with disabilities who rely on the program for their medications. The new law caps out-of-pocket spending, reduces premiums, and increases subsidies for low-income individuals. It’s essential for beneficiaries to review their plans and choose the best option for them, as the benefit has changed significantly since its introduction in 2003.
FAQs
Q: What is the out-of-pocket spending cap?
A: As of 2025, the cap will be $2,000 for about 3.2 million people with Medicare prescription drug insurance.
Q: What is the IRA’s plan for negotiating drug prices?
A: The law will allow Medicare to negotiate prices of some of the most expensive drugs directly with pharmaceutical companies.
Q: How will thelaw address the "donut hole"?
A: The law will eliminate the "donut hole," which suspends coverage just as people face growing drug costs.
Q: Who is eligible for the "extra help" subsidy?
A: About 17 million low-income people in Medicare drug plans are eligible for the "extra help" subsidy.
