I see a lot of articles trumpeting the “$2,000 annual out-of-pocket drug cap for seniors” in the Inflation Reduction Act. Let’s review how the 4 parts of Medicare Part D works.
1) Annual Deductible
For 2022, the annual deductible is $480 out-of-pocket before any drug coverage licks in. For $480, Mark Cuban will likely sell you 3 or 4 times the amount of drugs than your price-gouging Medicare Part D insurer.
2) Initial Coverage
The insurance company tracks the spending by both you and the insurance company (on drugs the insurance company has price gouged) until you have together spent a total of $4,430 in 2022.
3) The Coverage Gap
After you’ve reached the initial coverage limit for the year, you enter the coverage gap. During the gap, you will pay only 25% of the retail cost of your medications (with unlimited price gouging setting the retail price.) Your gap spending will continue until your total out-of-pocket drug costs have reached $7,050 in 2022.
4) Catastrophic Coverage
After you’ve spent the $7,050 out-of-pocket for the year, you enter Catastrophic Coverage, where you are responsible for 5% of the drug’s cost.
For a $100,000/yr drug, that’s $5,000 in addition to the $7,050 you’ve already spent. For a $500,000 drug, you need to come up with an extra $25,000 in addition to the $7,050 you’ve already spent.
Less then 2% of Medicare beneficiaries tumble into the despair of Catastrophic Coverage each year where there is no limit to what you’ll be charged. The $2,000 annual limit in the just passed Senate bill applies only to the Catastrophic Coverage portion of Medicare Part D.
So the total annual out-of pocket limit on your Part D drug coverage is $9,050/year under the new law. (i.e., the $7,050 limit on the coverage gap plus the $2,000 limit on Catastrophic Coverage under the new law), not $2,000/year.