The National Organization for Rare Disorders (NORD) has important information to share with you ahead of Medicare Open Enrollment as two new benefits of the Inflation Reduction Act, or IRA, become available. It is particularly important for the rare disease community as it affects how much you may pay for your medications if you have Medicare.

1. There is now a $2,000 cap on your out-of-pocket prescription drug costs

Beginning in 2025, a law called the Inflation Reduction Act (IRA) will make significant changes to Medicare prescription drug plans, also known as Part D plans. This law sets a yearly limit on how much you must pay for prescription drugs at $2,000 for 2025. After that, the cap will change each year based on inflation. If your drug plan has a deductible, that money you pay for your deductible counts toward the $2,000 cap. For example, if your yearly deductible is $100, once you have paid that, you will only have to pay $1,900 more that year for your prescription drugs. 

This $2,000 cap only applies to drugs covered on your Medicare prescription drug (Part D) plan formulary and does not count towards therapies typically administered in your doctor’s office or drugs that are not on your Medicare prescription drug plan formulary. Drugs that are typically administered in your doctor’s office are usually covered by Part B. The list of drugs that are covered by the drug plan is called the “formulary.” Drugs not covered by the plan are referred to as “not on formulary.” (If the drug you take is “not on formulary,” you still have options; scroll down to the FAQ for our recommendations.) 

Every year, during the annual Medicare Open Enrollment period from October 15-December 7 (which is different than the Medigap Open Enrollment period when you turn 65), it is extremely important to look at the Medicare prescription drug plans available to you and check which drugs a plan covers before you sign up. Make sure the prescription medications you take now, or expect to be taking in the upcoming year, are covered by the plan you choose. To check if a plan covers a drug you are currently taking, or expect to be taking in the upcoming year, go to the Medicare Plan Finder on the Medicare.gov website.

Deciding on the right medication is a choice you make with your healthcare provider. During the Open Enrollment period, it is important to check if your current plan still covers the medicines you need and to carefully look at any new plan’s drug coverage, co-pays, and co-insurance. 

You can only choose a new plan once per year, with limited exceptions. 

2. You can pay for medicine in monthly installments, with a limit each month

The IRA allows everyone with a Medicare drug plan to choose to join the monthly payment plan, either before the plan year starts or at any time during the year. This program is called the Medicare Prescription Payment Plan (M3P) or “smoothing.” You must sign up to utilize this option.

The Medicare Prescription Payment Plan is a great option for patients who have high drug costs early in the year. It may not work as well for patients who sign up for M3P later in the year or have high drug costs later in the year because there will be fewer months to spread out costs across to make monthly payments more manageable. The Medicare Prescription Payment Plan only covers out-of-pocket costs for prescription medications and does not include premiums.  

Want to know more about if the Medicare Prescription Payment Plan might be the right option for you? Use the Medicare Plan Finder website or check out the Medicare Prescription Payment Plan website to find out more! 

NORD staff have recorded videos in English and Spanish explaining these changes in detail. Those who would prefer to watch or listen to those videos can access them on YouTube here.

Frequently Asked Questions

Who is eligible for Medicare and how to enroll:

Medicare is health insurance for people 65 or older. You may be eligible to get Medicare earlier than age 65 if you have a disability, End-Stage Renal Disease (ESRD), or Amyotrophic Lateral Sclerosis (ALS).  

Medicare has multiple parts:

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All individuals who are enrolled in Medicare (either Medicare Advantage, or Medicare Parts A and B, also known as traditional or original Medicare) have an insurance card that looks like this: 

Individuals who have traditional Medicare may also buy Medicare Part D, or Medicare drug coverage, which helps cover the cost of prescription drugs. Prescription drugs are drugs that you pick up at a pharmacy and may include either pills or drugs you inject yourself. Medicare Part D does not cover drugs that are given to you by a doctor. Drugs given to you by a doctor that you do not get from the pharmacy are usually covered by Medicare Part B (if you have original Medicare) or through your Medicare Advantage plan. All Medicare Part D plans cover a wide range of prescription drugs, but not all plans are the same. (Go back to the top of this page to read more about choosing the right plan for you.) 

Individuals who have traditional Medicare (Parts A and B) may also buy a Medicare supplement plan, which may be called Medigap. Medigap is another health insurance policy that can help cover costs for services that traditional Medicare (Parts A and B) does not cover, including co-payments, co-insurance, and deductibles. Some Medigap plans also cover services that traditional Medicare does not cover, like medical care when you travel outside the U.S. (Scroll down for more information about Medigap.) 

If you have Medicare Advantage (MA or Part C), you also have an insurance card, or insurance cards, that may look like one of these: 

You must have Medicare Parts A and B and live in the Medicare Advantage Plan’s service area to be eligible to join a Medicare Advantage (MA) Plan. If you join a Medicare Advantage Plan, the plan will provide all your Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance) coverage. Almost all Medicare Advantage (MA) plans include prescription drug coverage. If you choose a Medicare Advantage plan that does not have prescription drug coverage, you can sign up for a separate Part D prescription drug plan. You will have to pay two separate premiums in Medicare Advantage: your monthly Part B premium and a monthly premium for all the other services in your Medicare Advantage plan. You need to compare the plans that are available to you. Make sure you understand what each plan covers and what you will need to pay before you decide to join. New to Medicare? Check out this website to learn more. 

Note: The Low-Income Subsidy (LIS) or Extra Help program is a federal program that helps people with low income and few assets pay for prescription medications and other costs related to health care. The program provides financial support for people with an income of less than 150% of the federal poverty level ($20,590 for an individual in 2024). Medicare.gov has a resource to help you quickly see if you qualify for Extra Help. You can enroll in the Extra Help program by visiting SSA online at ssa.gov/ExtraHelp or calling 1-800-772-1213. Visit ssa.gov/locator to get the telephone number for your local Social Security office. For one-on-one assistance with Extra Help, contact your State Health Insurance Assistance Program (SHIP) at ShipHelp.org or call 1-877-839-2675 to get the number for your local SHIP.

What is the Inflation Reduction Act (IRA)?

The Inflation Reduction Act (IRA) is a law that was passed by Congress and signed into law by President Biden in August 2022. One of its aims is to help millions of people enrolled in Medicare be better able to afford their medications.  

Will the IRA make drug prices more affordable?

For the first time, the IRA makes it possible for Medicare to negotiate a limited number of drug prices with pharmaceutical companies, but it is not clear if these negotiations will reduce patient out of pocket costs on those negotiated prescription drugs. The negotiated prices for the first ten products selected for negotiation go into effect January 1, 2026. For the first two years of the negotiation program, only Part D drugs will be eligible for negotiation. Beginning in 2028, however, Part B drugs are also eligible for negotiation. 

In addition to these drug price negotiations, starting January 1, 2025, the IRA puts an annual limit of $2000 on how much people with Medicare Part D prescription drug coverage will pay out of pocket for their prescription medications from the pharmacy. 

Does the $2,000 maximum out of pocket cap apply to all prescription drugs?

No. This $2,000 cap only applies to drugs covered by your Medicare Part D prescription drug plan. Medicare drug plans may choose not to cover certain drugs. The list of drugs that are covered by the drug plan is called the “formulary.” Drugs not covered by the plan are referred to as “not on formulary.” The Medicare Plan Finder allows you to enter the specific medications and doses you take and compare costs between plans and pharmacies. 

What can I do if the drug recommended by my doctor is not covered?

If you choose to pay for a medication that is not covered by your prescription drug plan, your payment for that drug that is “not on formulary” will not count toward the $2,000 cap. 

If the drug you take is not covered, you have options: 

• Ask your doctor if there is a generic version of the drug. 

• Check if there is a similar drug on your plan’s list and then ask your doctor if that is an option for you. 

• Ask your doctor to request an exception to get the medication covered by your drug plan. If your plan says no, you can appeal. 

• See if the drug manufacturer or NORD has a patient assistance program for which you may qualify. 

What is a Medigap Policy?

“Medigap,” also known as Medicare Supplement Insurance, is another health insurance policy that can help cover costs for services that traditional Medicare (Parts A and B) does not cover, including co-payments, co-insurance, and deductibles. Some Medigap plans also cover services that traditional Medicare does not cover, like medical care when you travel outside the U.S. To be able to buy a Medigap policy, you must be enrolled in both Medicare Parts A and B. You will still have to pay the monthly Medicare Part B premium, AND you will have to pay a premium to the Medigap insurance company also. 

– When is enrollment for a Medigap program?

The best time to buy a Medigap policy is during the Medigap Open Enrollment Period. The Medigap Open Enrollment Period lasts from the first day of the month that you turn 65 until 6 months later. During this 6-month Open Enrollment period, an insurance company cannot refuse to sell you a policy or charge you more because of your health.

– What if I enroll in Medigap AFTER the 6-month enrollment period?

If you choose to enroll in a Medigap plan after the first Open Enrollment period, an insurance company can refuse to sell you a policy or may charge you more because of health conditions that you may have (pre-existing conditions). You will still have to pay the monthly Medicare Part B premium, and you will also have to pay a premium to the Medigap insurance company. 

Where can I go for help understanding my Medicare Coverage and what plan is the best for me?

You can find help with understanding your Medicare coverage in a few places. First, the Medicare Plan Finder will allow you to compare which plans are available in your area, and which may be right for you. You can also call Medicare directly at 1-800-MEDICARE (1-800-633-4227) 24 hours a day, 7 days a week. You can also connect with your State Health Insurance Assistance Program (SHIP). SHIP staff and volunteers are not connected to any insurance company or health plan and can help you with personalized counseling on your health insurance. They can also help you with questions on your Medicare rights, billing problems, complaints about medical care or treatment, how Medicare works with other insurance, and finding help paying health care costs.