Biden’s Drug Cost Cap to Save US Seniors Over $1,000 Annually, Study Finds

A new study reveals that over 1 million Americans will save more than $1,000 a year starting in 2025, thanks to an annual $2,000 cap on out-of-pocket prescription drug costs under Medicare. This cap, part of President Joe Biden’s Inflation Reduction Act, aims to ease the financial burden for seniors and people with disabilities who rely on the Medicare Part D program.

Key Details of the Drug Cost Cap

The $2,000 annual cap is set to benefit more than 3.2 million people, around 8.4% of Medicare Part D beneficiaries who do not receive other subsidies, according to a report by AARP, the leading lobbying group for older Americans. The report is based on a study commissioned by AARP and conducted by health consultancy Avalere.

Before this new cap, Medicare Part D required beneficiaries who did not qualify for low-income subsidies to pay 5% of their drug costs regardless of how much they had already spent, often leading to substantial out-of-pocket expenses.

By 2029, the lowered cap is expected to benefit 4.1 million people, or about 9.6% of beneficiaries. The cap will particularly help those who frequently use high-priced, branded drugs, with significant savings expected for those patients.

Financial Impact

Nearly 40% of individuals who reach the $2,000 cap over the next five years—around 1.4 million people—are projected to save over $1,000 annually. Within this group, approximately 420,000 people, or 12%, could save more than $3,000 each year. Currently, some Medicare beneficiaries face out-of-pocket costs exceeding $10,000 a year.

The study excluded from its analysis Part D beneficiaries who receive low-income subsidies and pay minimal amounts for their medications.

Broader Implications

AARP CEO Jo Ann Jenkins emphasized the positive impact of the cost cap, stating, “The money seniors will no longer have to spend out-of-pocket is money they can invest in their families, broader health needs, or simply save to achieve greater financial stability.”

The new cap represents a significant shift in how Medicare Part D handles drug costs, providing substantial relief to millions of Americans facing high medication expenses.