The Part D out-of-pocket cap, in plain numbers
Drug spending now has a ceiling, and it changes how a plan should be chosen. Here is what the cap does and does not do.
By Desmond Okoye, Cedar Landing Benefits
For years the frightening part of Part D was that there was no upper limit: a serious prescription could keep costing indefinitely. That has changed, and the annual out-of-pocket cap is the most consequential improvement to Medicare drug cover in a long time.
It has also changed how plans should be compared, which fewer people have noticed.
What the cap actually does
Once your out-of-pocket spending on covered drugs reaches the annual limit, you pay nothing more for covered drugs that year. There is also an option to spread those costs across the year in monthly instalments rather than meeting them in January.
The exact figure is set annually. Because it dates so quickly, we keep it in our calculators as a clearly labelled sample figure rather than printing it in a post that will be read in two years.
What it does not do
The cap counts spending on covered drugs only. If a medication is not on your plan's formulary, what you spend on it does not count toward the cap at all — which makes checking the formulary more important than ever, not less.
Premiums do not count either. A plan with a low premium and a poor formulary can still cost you more across a year than a dearer plan that covers your list properly.
How to compare plans now
Start with your medication list, by name and dose. Check each drug against each plan's formulary and note its tier. Then add the annual premium to your expected copays, and stop worrying about the tail risk — the cap has taken care of it.
That is a very different exercise from choosing the cheapest premium on the screen, and it is the one that saves households real money.
An estimate for planning, not a quote. Medicare and the Marketplace set your real figures.
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