MEDICARE DRUG COSTS CAPPED IN 2024 AND BEYOND:

Changes brought about by the 2022 Inflation Reduction Act mean that people on Medicare Part D plans now pay no more than roughly $3,300 on drugs annually—a number that could shift a bit based on whether they take brand or generic medications. In 2025, that cap will change again to a flat $2,000.

People who buy drugs through Medicare Part D, the government- funded insurance program that covers most prescription drugs, pay thousands of dollars for their drugs until they reach the so-called catastrophic zone of spending. After that, they had to continue paying 5% of their drugs’ cost for the rest of the year, sometimes adding up to thousands more.

There are guidelines for what percentage the Medicare plan covers and what percentage the insured person must pay in each phase of your Medicare coverage. The four phases of coverage are:

• the deductible phase
• initial coverage phase
• the coverage gap
• the catastrophic phase.

This year, that 5% coinsurance was eliminated. Once Medicare patients spend roughly $3,300—the “catastrophic zone” threshold for 2024—they will not have to pay any more out of pocket for Part D drugs.

The IRA legislation is better known for allowing Medicare officials to negotiate the price of drugs. But by doing away with the 5% coinsurance that patients had to pay after reaching the “catastrophic” spending threshold, the law forces insurers and drugmakers to pick up a larger part of the tab. The change amounts to a cap on what Medicare patients will pay for their Part D drugs in 2024. Part D covers most outpatient prescription drugs, though some medications, such as physician-administered infusions, are covered under Part B.