In 2025, Medicare prescription plan participants will receive a savings of $1,000 or more annually with the implementation of a new out-of-pocket cap.

• Medicare Part D retirees will experience reduced prescription drug costs in 2025.
• Annual out-of-pocket costs will be capped at $2,000 starting in January.
• New research from the AARP estimates how much retirees may save.

Starting in 2025, retirees who are concerned about the high cost of prescription drugs will receive relief.

From January onwards, Medicare drug plan enrollees will have their yearly out-of-pocket drug expenses limited to $2,000.

According to a report from AARP, from 2025 to 2029, approximately 1.4 million Medicare drug coverage participants who hit the new out-of-pocket cap can expect to save an estimated $1,000 or more annually.

Over 420,000 individuals will experience savings of over $3,000 during that period.

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According to AARP, in 2025, retirees who reach the out-of-pocket cap will spend approximately $1,100 out-of-pocket, a 56% reduction from the previous $2,600 without the changes.

Nancy LeaMond, executive vice president and chief advocacy and engagement officer at AARP, stated during a Wednesday presentation on the research that the money could be used to buy groceries and pay bills instead.

The new limits on prescription drug spending are a result of Congress's 2022 Inflation Reduction Act, which granted Medicare the authority to negotiate certain drug prices. The Biden administration recently disclosed the prices for the first 10 drugs involved in these negotiations.

Under the Medicare Part D program, participants were obligated to pay 5% of their prescription drug costs without any cap on expensive medications, even after exceeding a certain spending limit and entering catastrophic coverage.

High prescription costs could result in out-of-pocket expenses exceeding $10,000 annually, causing some retirees to forgo filling prescriptions or skip doses, according to the AARP.

Real people, including parents, grandparents, friends, and neighbors, will finally experience relief from the high cost of drugs and the fear that their medication prices will continue to escalate, according to LeaMond.

The Inflation Reduction Act led to the removal of the 5% coinsurance for the catastrophic coverage phase of Part D in 2024, resulting in an out-of-pocket cap of approximately $3,300 for brand-name prescriptions, according to KFF.

In 2025, a $2,000 cap on out-of-pocket Part D prescription spending will be implemented, and this limit will be adjusted annually.

In 2025, an estimated 3.2 million individuals, or 8.4% of Medicare Part D enrollees, will benefit from a change set to take effect. By 2029, this number is expected to increase to 4.1 million people, or 9.6% of Part D enrollees. Currently, almost 56 million beneficiaries have Medicare Part D coverage.

Medicare beneficiaries are experiencing a "significant impact" from the 2022 law, which allows them to pay no more than $35 per month for insulin and receive certain free vaccines, according to LeaMond.