Starting Jan. 1, older adults with Medicare will spend no more than $2,000 a year on prescription drugs when a new price cap on out-of-pocket payments under the Inflation Reduction Act goes into effect.
Experts say this change is expected to bring great relief to cancer patients, who often have difficulty affording their medications due to the high price of drugs used in oncology.
Diana DiVito of Canonsburg, Pennsylvania, recalled the shock she felt after receiving her first copay for the cancer drug Imbruvica in 2016.
This 83-year-old woman was diagnosed in 2005 with chronic lymphocytic leukemia, a type of blood cancer that originates in the bone marrow. He underwent treatment, including chemotherapy, and went into remission. When the illness reappeared, he began taking Imbruvica.
In 2021, DiVito had spent $56,000 out of pocket on the daily pill.
“The co-payments left me speechless”said DiVito, who added that she has limited income since her husband died in 2023. “The first year she had to pay 8,500 out of pocket, and then the payments went up about 1,000 each year.”
The new price cap will apply to all prescription drugs under Medicare Part D; It will not apply to drugs given to patients in the hospital or other healthcare settings, such as chemotherapy or anesthesia. Medicare beneficiaries will also have the new option to spread their payments throughout the year, rather than paying a large co-pay all at once.
Before the change, Medicare beneficiaries typically had to spend $7,000 or more out of pocket on prescription drugs before they could qualify for so-called catastrophic coverage, where insurance steps in and covers most of the cost of the drug. With this coverage, patients must pay a small copayment or a percentage of the cost of the drug, usually 5%.
Typically, DiVito reached catastrophic coverage almost immediately after his plan reset each January. Although this helped him reduce costs for most of the year, the first prescriptions he filled were very expensive.
Now that he’s looking ahead to next month’s cap, DiVito said he has a lot less stress and spends a little more freely.
“This Christmas I’m going to be a little more generous with my grandchildren,” she said.
millions of beneficiaries
The Inflation Reduction Act’s $2,000 limit comes after years of public outcry over rising prices for prescription drugs in the United States, including those used in cancer treatments.
The law phased in the cap, starting with a $3,250 cap on out-of-pocket spending on prescription drugs in 2024.
More than 65 million people, primarily seniors, are enrolled in Medicare. A study published in September in JAMA Network Open found that annual out-of-pocket costs for cancer drugs averaged $11,284 for Medicare Part D beneficiaries in 2023. (Part D refers to prescription drug coverage.)
A separate report from the nonprofit group AARP found that 3.2 million Medicare beneficiaries will see savings of the cap on out-of-pocket expenses in 2025. By 2029, the number is expected to increase to 4.1 million members. The report does not break down the savings for people with certain diseases, such as cancer. However, research shows that about 60% of cancer cases occur in adults over 65 years of age.
According to the AARP report, it is estimated that, on average, 1.4 million members who reach the out-of-pocket limit between 2025 and 2029 will realize annual savings of $1,000 or more, and just over 420,000 will realize savings of more of 3,000 dollars.
Mary and Jim Scott of Oregon are among the Medicare enrollees hoping to save next year.
In 2023, the couple’s out-of-pocket expenses on prescription drugs skyrocketed to $8,000, up from a previous annual average of $240. It was a difficult year as Jim, 83, faced multiple serious health issues, including congestive heart failure, acute kidney injury and bladder cancer.
The new cap will not apply to medications administered in a healthcare facility (these are covered by Medicare Part B), meaning Jim will still be responsible for the costs of chemotherapy not covered by his insurance.
Still, Mary, 73, says the move comes as a relief after more than a year of battling the rising costs of cancer care, and makes it easier for the couple to stay afloat and focus on what matters most: health. of Jim, his grandchildren, his dog and his garden.
“We’re not planning any amazing trips. We still need to live a low-key life,” Mary explained. “But at the end of the summer, maybe we can put new siding on the house and do some things we’ve been putting off.”
Living on a fixed income
Juliette Cubanski, deputy director of the Medicare policy program at KFF, a nonprofit group that researches health policy issues, noted that in the nearly 20 years since Medicare Part D was introduced, there has never been a cap annual out-of-pocket expenses.
Cubanski was one of the authors of an analysis that found that about 1.5 million people on Medicare had out-of-pocket prescription drug costs greater than $2,000 in 2021 and would have benefited from the current cap. Of the 1.5 million, about 200,000 Medicare enrollees spent $5,000 or more on their prescriptions that year.
“So people who need really expensive medications or who take a lot of medications where the monthly cost adds up, they may have had to pay several thousand dollars out of pocket each year“he stated.
According to Cubanski, many Medicare beneficiaries are retired and living on fixed incomes, which means they often go into deep debt or even go bankrupt.
Arthur Caplan, chief of the division of medical ethics at New York University (NYU) Langone Medical Center, said this is especially true for cancer patients. An American Cancer Society Cancer Action Network survey released in May found that nearly half of cancer patients have medical debt, even though most are insured.
“We have many emerging treatments for cancer,” Caplan said. “They are enormously expensive.”
Cubanski said that even for those who don’t spend more than $2,000 a year, the cap is still important.
“The unfortunate truth is that we are all one terrifying diagnosis away from needing an expensive medication,” he said.
Is $2,000 a year too high?
George Valentine, 73, of Philadelphia, said that in 2002, when he went for his annual checkup, his doctor noticed something unusual in his test results. Tests revealed that he had chronic lymphocytic leukemia.
The medications he needed had a high price: about $14,000 a month. While working in the IT industry, this wasn’t a big problem because his work-related health insurance included an out-of-pocket maximum, which he reached each year.
However, when Valentine retired in 2019, she discovered a major gap in Medicare coverage. Unlike his previous insurance, Medicare had no out-of-pocket limit, leaving him responsible for 5% of his drug costs after reaching the catastrophic coverage phase.
“5% of $14,000 is a lot of money,” he said. “I would hit the catastrophic phase in February of any year, and for the rest of the year I would have this burden of $700 or so every month.”
Valentine, now an advocate for the PAN Foundation, a financial assistance group for patients with life-threatening chronic illnesses, indicated that he would prefer the New Year’s out-of-pocket spending cap to be “zero.”
Still, he added, with the limit of $2,000 now at least he can sleep at night.
“The only thing that matters is that when it reaches $2,000, it’s over,” he stressed.
