Limitations of the Medicare Drug Cap

While the introduction of the Medicare drug cap in 2025 is a significant step towards making prescription medications more affordable, there are still some limitations and challenges to consider. Here are some key limitations of the Medicare drug cap:

The $2,000 Cap May Still Be Too High for Some Beneficiaries

• Although the $2,000 out-of-pocket cap is a substantial improvement, it might still be unaffordable for low-income beneficiaries who do not qualify for extra financial assistance. For individuals on a fixed income, $2,000 a year can still be a significant burden, particularly if they have other medical expenses.
• Some patients may still struggle with costs in the earlier part of the year, even if the cap limits their total annual expenses.

Only applies to Medicare Part D drugs

• The cap is specifically for Medicare Part D (stand-alone PDPs or MAPD plans) and does not cover drugs administered under Medicare Part B, such as certain cancer medications or infusion therapies. Beneficiaries who need these Part B drugs might still face high out-of-pocket expenses without the same cap protection.
• Many beneficiaries may not understand that the cap only applies to drugs that are on your plan’s formulary. If the client uses drugs that are not on their plan’s formulary, the cost of these drugs does not count towards the $2,000 cap. When the client uses a prescription drug that is off formulary, they should have their doctor request a formulary exception if possible.
• While the cap limits spending on prescriptions from a pharmacy, it doesn’t address the costs of drugs received during a hospital stay or in a doctor’s office, which can still be significant.

Potential for Premium Increases

• To offset the reduced out-of-pocket costs, some Part D plans might raise their monthly premiums. This means that, while beneficiaries may pay less at the pharmacy, they could see higher premiums throughout the year.
• Premium increases could make plans less affordable, especially for beneficiaries who use fewer medications and might not reach the $2,000 cap.

Does Not Impact Drug Prices Directly

• The $2,000 cap limits what beneficiaries pay out-of-pocket but does not control or reduce the actual prices of drugs set by pharmaceutical companies.
• Without addressing the root issue of high drug prices, there is still the potential for overall spending in Medicare Part D to rise, which could lead to higher premiums and other costs for beneficiaries over time.

Complex Smoothing Mechanism

• The smoothing mechanism introduced with the cap allows beneficiaries to spread out their out-of-pocket expenses throughout the year. While this can be helpful, it may also be complicated for some people to understand and use effectively.
• Beneficiaries might need assistance with opting into the smoothing mechanism and managing payments, and there could be administrative challenges that make it difficult for some to take full advantage of this feature.

Learn more about Medicare Smoothing

Watch a quick YouTube video on the Medicare prescription payment program

Limited Impact on Brand-Name and Specialty Drugs

• The cap does not change the formulary (list of covered drugs) or pricing tiers for plans that include Part D coverage. In other words, beneficiaries might still face high costs for certain brand-name and specialty drugs until they reach the $2,000 limit.
• Specialty drugs for conditions like cancer, multiple sclerosis, and rheumatoid arthritis are often very expensive, and while the cap limits total spending, beneficiaries may still need to pay large sums before they hit the cap, especially early in the year.

Variability Across Part D Plans

• All Part D plans vary in coverage, formularies, and cost-sharing structures. Beneficiaries may still face challenges finding a plan that covers all their medications at a reasonable cost, even with the new cap in place. Click her to learn why you should use a licensed Medicare agent
• Some plans may be better at managing costs than others, and beneficiaries will need to carefully compare their options during the Medicare AEP to ensure they get the best coverage for their needs.

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Although the $2,000 out-of-pocket cap for Medicare Part D drugs is a step forward in making prescription drugs more affordable, it is not a perfect solution and does not address all the concerns associated with drug pricing and affordability.