Under the new price cap on out-of-pocket payments under the Inflation Reduction Act, older persons on Medicare will spend no more than $2,000 annually on prescription medications as of January 1.
According to experts, the shift is anticipated to significantly alleviate the financial burden on cancer patients, who sometimes find it difficult to pay for their treatments because cancer therapies are so expensive.
Canonsburg, Pennsylvania resident Diana DiVito remembers being shocked when she received her first co-payment for the cancer medication Imbruvica in 2016.
In 2005, the 83-year-old was identified as having chronic lymphocytic leukemia, a blood cancer that starts in the bone marrow. After receiving chemotherapy and other treatments, she experienced remission. She began using Imbruvica after experiencing a relapse.
DiVito paid $56,000 out of pocket for the daily tablet by 2021.
According to DiVito, who has been living on a meager salary since her husband passed away in 2023, the co-pays “blew me away.” The first out-of-pocket cost was $8,500, and subsequent years saw an increase of roughly $1,000.
All prescription medications covered by Medicare Part D will be subject to the new price cap; however, medications administered to patients in hospitals or other healthcare facilities, such as chemotherapy or anesthesia, would not be. Additionally, Medicare beneficiaries will now have the choice to spread out their payments over the year instead of making a sizable co-payment all at once.
Prior to the change, Medicare beneficiaries usually had to pay $7,000 or more out of pocket for their prescription medications before they were eligible for “catastrophic coverage,” which is when insurance takes over and pays for the majority of the medication’s cost. Patients are billed a nominal co-payment or a portion of the medication’s cost, often 5%, under this coverage.
Every January, DiVito’s plan reset would usually result in catastrophic coverage nearly instantly. That made the first few medications she filled extremely expensive, even if it helped with expenses for the most of the year.
DiVito said she is spending a little more freely and is under a lot less stress while she awaits the cap next month.
“This Christmas, I’m giving my grandchildren a little more,” she remarked.
Millions expected to benefit
The Inflation Reduction Act s $2,000 price cap comes after years of public outcry about thesoaring cost of prescription drugs, including cancer medications, in the United States.
The law progressively increased the cap, beginning in 2024 with a $3,250 cap on prescription medication out-of-pocket expenses.
Medicare has almost 65 million enrollees, primarily elderly persons. According to a September research in JAMA Network Open, Medicare Part D enrollees’ yearly out-of-pocket expenses for cancer drugs totaled $11,284 in 2023. (Prescription medication coverage is referred to in Part D.)
A separatereport from the nonprofit group AARPfound that 3.2 million Medicare recipients are expected to see savings from the out-of-pocket cap in 2025. It is anticipated that by 2029, there would be 4.1 million enrollees. Savings for individuals with certain illnesses, including cancer, were not broken down in the report. However, studies reveal that persons 65 and older account for over 60% of cancer cases.
On average, 1.4 million enrollees who reach the out-of-pocket cap from 2025 to 2029 are estimated to see annual savings of $1,000 or more, the AARP report found, and just over 420,000 will see savings of more than $3,000.
Mary and Jim Scott of Oregon are among the Medicare enrollees expecting to see savings next year.
In 2023, the couple s out-of-pocket prescription drug expenses skyrocketed to $8,000, up from their previous annual average of $240. It was a difficult year during which Jim, 83, faced multiple serious health issues, including congestive heart failure, an acute kidney injury and bladder cancer.
The new cap won t apply to drugs given in a health care setting (these are covered under Medicare Part B), meaning Jim will still be responsible for the costs of chemotherapy not covered by his insurance.
Still, Mary, 73, said the change offers a sense of relief after more than a year of struggling with the soaring costs of cancer care, making it easier for the couple to stay afloat and focus on what matters most: Jim s health, their grandchildren, their dog and their garden.
We re not planning any amazing trips. We re still needing to live our low-key lives, Mary said. But by the end of the summer, maybe we ll be able to put up some new siding on the house and do a few things that we ve deferred.
Living on fixed incomes
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 an annual cap on out-of-pocket costs.
Sheco-wrote an analysisthat found about 1.5 million people on Medicare had out-of-pocket prescription drug costs exceeding $2,000 in 2021 and would have benefited from the cap. Of the 1.5 million, about 200,000 Medicare enrollees spent $5,000 or more for their prescriptions that year.
So, for people who need really expensive drugs or who take a lot of medications where the monthly cost adds up, they may have had to pay several thousands of dollars out of pocket each year, she said.
Many people on Medicare are retired and live on fixed incomes, Cubanski said, meaning people often go deep into debt or even bankrupt.
Arthur Caplan, the head of the division of medical ethics at NYU Langone Medical Center in New York City, said that s especially true for cancer patients: Asurvey from the American Cancer Society s Cancer Action Network publishedin May found that nearly half of cancer patients have medical debt, despite most being insured.
We have many emerging treatments for cancer, Caplan said. They are hugely 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 we re all one scary diagnosis away from needing an expensive drug, she said.
Is $2,000 a year still too high?
George Valentine, 73, of Philadelphia, said he was at his annual physical in 2002 when his doctor noticed something unusual in his test results. Further testing revealed he had chronic lymphocytic leukemia.
The medications he needed came with a hefty price tag around $14,000 a month. While he was working in the information technology industry, this wasn t a major issue because his job-based health insurance included an out-of-pocket maximum, which he hit every year.
However, when Valentine retired in 2019, he discovered a significant gap in Medicare s coverage. Unlike his previous insurance, Medicare had no out-of-pocket spending limit, leaving him responsible for 5% of his medication costs after reaching the catastrophic coverage phase.
Five percent of $14,000 is a lot of money, he said. I would get to the catastrophic phase by February in any given year, and for the rest of the year I had this burden of $700 or around there every month and it never ended.
Valentine, now an advocate for the PAN Foundation, a patient financial assistance group for people with life-threatening chronic conditions, said he would prefer the out-of-pocket cap in the New Year to be zero.
Still, he added, with the $2,000 cap he can now at least sleep at night.
All that matters is when I hit $2,000, I m done, he said.
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