TrOOP or your true out-of-pocket spending is the amount you - or others on your behalf - spend toward your Medicare Part D plan's formulary Part D drugs. For example, if you purchase a $100 formulary drug and pay a $47 copay, the $47 copay counts as TrOOP and accumulates toward your annual maximum out-of-pocket spending limit.

Editorial note on True out-of-pocket spending v. Total out-of-pocket spending.  Since the 2006 start of the Medicare Part D program, TrOOP seems to have meant both "True" OOP and "Total" OOP to different people.  At first, TrOOP was easily calculated based on a person's spending (plus what certain others contributed to a person's Part D drug spending).

As the years passed, the Donut Hole slowly "closed", and the brand-name drug manufacturer's discount to brand-name drug purchases in the Donut Hole began to count toward a person's TrOOP, the TrOOP acronym seemed less like "True" out-of-pocket spending and more like the "Total" out-of-pocket spending (for example, in 2024, the pharmaceutical manufacturers 70% contribution to the Donut Hole Discount on your brand-name Part D drugs counts toward your TrOOP).

In 2025 and beyond, TrOOP again looks like "True" out-of-pocket spending when considering a Medicare Part D plan with a Defined Standard benefit where what you spend on Part D drugs simply accumulates as your TrOOP.  However, when looking at a 2025 Medicare Part D plan with Enhanced Alternative benefits, a person's TrOOP accumulation seems more like "Total" instead of "True".  See the article: "Medicare Part D Math 2025: Spending $329 on $12,000 worth of Part D drugs will meet the $2,000 annual maximum out-of-pocket spending limit."

However, no matter whether TrOOP is the "True" or "Total" out-of-pocket Part D formulary drug spend, the annual accumulated TrOOP threshold as defined by Medicare still remained the crossing point into the Catastrophic Coverage phase.

Remember,  the annual TrOOP threshold is defined every year by the federal government and represents the maximum Part D drug spending before entering the Catastrophic Coverage phase of your Medicare Part D prescription drug plan.  As a note, the Medicare Part D TrOOP threshold changes each year and you can view the TrOOP changes in the chart below and in the table here:  q1medicare.com/PartD-The-MedicarePartDOutlookAllYears.php


As a note, in 2024, the Inflation Reduction Act (IRA) eliminated beneficiary cost-sharing in the Catastrophic Coverage phase and a Medicare Part D plan member will no longer have any out-of-pocket costs for Part D formulary drug purchases after reaching the plan's total out-of-pocket spending threshold of $8,000.


Therefore, the 2024 "TrOOP threshold" of $8,000 acted as the annual prescription drug maximum out-of-pocket spending limit (RxMOOP).


Important Update:  2025 No Coverage Gap or Donut Hole - TrOOP still accumulates and determines entry into Catastrophic Coverage.

Along with the 2025 elimination of the Donut Hole and the Donut Hole Discount, the 2025 RxMOOP will be reduced from $8,000 to $2,000.

In 2025 and beyond, Medicare Part D beneficiaries will stay in the Initial Coverage phase until they reach the maximum out-of-pocket spending limit for Part D formulary drugs (RxMOOP) - which is set at $2,000 for 2025 ($2,100 in 2026).

After reaching RxMOOP, Medicare Part D beneficiaries will enter Catastrophic Coverage and have a $0 copay (no additional costs) for all formulary Medicare Part D drugs through the remainder of the year.

Your drug purchases count toward TrOOP accumulation when they meet these conditions:

• Your generic or brand-name drugs are on your Medicare Part D prescription drug plan’s formulary or drug list OR
  
  
• Your prescriptions were not on your plan's formulary, but you are allowed to count the coverage costs toward true out-of-pocket costs because you requested a coverage determination (formulary exception) that was granted by your Medicare plan and your non-formulary Part D drugs are now covered by your plan - AND
  
  
• Your medications were purchased at one of your Medicare plan's network pharmacies - OR
  
  
• Your Medications were purchased at an out-of-network pharmacy in accordance with the plan’s out-of-network policy (for instance, this was an emergency fill with no available in-network pharmacy and you submitted the prescription to your Medicare Part D plan).
  

And, Medicare also provides the following:

What payments count toward a person's TrOOP accumulation?

• The annual initial deductible, that is, the amount a person pays for their Medicare Part D covered prescriptions before their Medicare Part D drug plan begins to pay.  Most Medicare Part D plans have an initial deductible and begin with coverage after the deductible is met.  So, if your Medicare Part D plan has an initial deductible, you pay 100% of the cost of your medications -- up to your initial deductible limit -- and then your Medicare Part D plan begins to pay along with your coinsurance or copayment.  What you pay during the initial deductible phase counts toward your TrOOP.
  
  
• Your formulary drug cost-sharing, that is, the amount a person pays for each Medicare Part D plan covered prescription drug after their drug plan begins to pay (i.e., your copayments or coinsurance).  So, if you have a $30 copayment for a particular medication that is covered by your Part D prescription drug plan, you get TrOOP credit for the $30.  If someone else, like a friend or family member, makes the payment for you (say, $30 in this example), then this amount is also counted toward TrOOP.  So if your medication has a retail cost of $100, and your coverage cost is $30, your Medicare plan pays the other $70, and you get the $30 counted toward TrOOP.
  
  
• (Plan year 2025 and beyond) Medicare Part D beneficiaries enrolled in either a stand-alone Medicare Part D prescription drug plan (PDP) or Medicare Advantage plan that includes drug coverage (MAPD) with Enhanced Alternative (EA) drug benefits will get credit toward their out-of-pocket Part D drug spending (TrOOP) for the “greater of” either: (1) what the person actually spends through their Enhanced Alternative plan's cost-sharing or (2) the cost-sharing for the same formulary drug purchase as if they were enrolled in a Defined Standard (DS) drug plan with the standard 25% cost-sharing and a $590 deductible.  You can click here for an example.
  
  
• (Plan year 2025 and beyond) As noted by CMS, the "IRA specifically amends the definition of incurred costs that count toward TrOOP for CY 2025 to include payments for previously excluded supplemental benefits provided by [EA] Part D sponsors [as noted above] and Employer Group Waiver Plans (EGWPs).
  
  
• 2011 through 2024: Any payments a person makes during their plan’s coverage gap.  This includes what you pay and what others pay on your behalf (for instance, the brand-name drug manufacturer is paying 70% of your brand-name drug cost while you are in the Donut Hole and this 70% of retail cost is counted toward your TrOOP or Donut Hole exit point).  For example, if you purchase a formulary brand-name Medicare Part D drug in the Coverage Gap or Donut Hole  - you will get the Donut Hole discount of 75% (you pay 25%) and get credit for 95% of the retail cost toward TrOOP.  Using the example from above, if your brand-name formulary drug has a negotiated retail cost of $100, you will pay $25 (25% of the retail price) and $70 (or 70%) will be paid by the Pharmaceutical Industry (the additional 5% will be paid by your Medicare Part D plan, but does not count toward TrOOP). So, you pay $25, but you will receive $95 (95%) credit toward your TrOOP.  Starting with plan year 2025, the brand-name drug manufacturer payments will not longer be counted in your TrOOP.
  
  
• Any payments for drugs made by any of the following programs or organizations on your behalf:
  
  
  • Any money a person enrolled in the Medicare drug plan uses from their Medical Savings Account (MSA), Health Savings Account (HSA), or Flexible Spending Account (FSA).
    
  • Payments made by family members or friends
    
  • "Extra-Help" from Medicare (Low-Income Subsidy LIS)
    
  • Indian Health Services (IHS)
    
  • AIDS Drug Assistance Programs (ASAPs)
    
  • Most Charities (unless they’re established, run, or controlled by the person’s current or former employer or union or by a drug manufacturer’s Patient Assistance Program (PAP) operating outside Part D)
    
  • Qualified State Pharmaceutical Assistance Programs (SPAPs)
    
  • (Ending in 2025)  The 2024 brand-name drug manufacturers providing discounts under the Medicare coverage gap discount program (see how the discount changed each year -- up until 2020, after which all formulary drugs receive a 75% discount and the Donut Hole is considered "closed").
    

What does not count toward a person's TrOOP accumulation?

• (Only for 2024) The cost-sharing portion paid by a Medicare drug plan (for example, for a $100 medication, you pay $20 and your plan pays $80, only the $20 counts toward your TrOOP),
  
  
• (Plan year 2025 and beyond)   Medicare Part D beneficiaries enrolled in either a stand-alone Medicare Part D prescription drug plan (PDP) or Medicare Advantage plan that includes drug coverage (MAPD) with Enhanced Alternative (EA) drug benefits will get credit toward their out-of-pocket Part D drug spending (TrOOP) for the “greater of” either: (1) what the person actually spends through their Enhanced Alternative plan's cost-sharing or (2) the cost-sharing for the same formulary drug purchase as if they were enrolled in a Defined Standard (DS) drug plan with the standard 25% cost-sharing and a $590 deductible.  You can
  
  
• (Plan year 2025 and beyond)  The brand-name drug manufacturer payments will not longer be counted as your TrOOP,
  
  
• Your monthly Medicare plan premiums,
  
  
• Drugs purchased outside the United States and its territories (for instance, drugs purchased in Mexico),
  
  
• Drugs not covered on the Medicare Part D plan formulary or drug list,
  
  
• Drugs covered by the plan that are excluded by Medicare law - for instance, drugs for hair growth that are covered by your plan as a supplemental or bonus drug do not count toward TrOOP (see Excluded Medicare Part Drugs),
  
  
• Over-the-counter drugs or vitamins (even if they are required by your Medicare Part D plan as part of Step Therapy),
  
  
• Finally, CMS notes: Payments do not count toward a person’s TrOOP spending if the payments are made by (or reimbursed to the person enrolled in a Medicare drug plan by) any of the following:
  
  
• (Changed starting with plan year 2025)  Group health plans such as the Federal Employees Health Benefit Program (FEHBP) or employer or union retiree coverage
  
  
• Government-funded health programs such as Medicaid, TRICARE, Workers’ Compensation, the Department of Veterans Affairs (VA), Federally Qualified Health Centers (FQHCs), Rural Health Clinics (RHCs), the Children’s Health Insurance Program (CHIP), and black lung benefits
  
  
• Other third-party groups with a legal obligation to pay for the person’s drug costs
  
  
• Patient Assistance Programs (PAPs) operating outside the Part D benefit
  
  
• Other types of insurance
  
  Please note:  You must let your Medicare drug plan know if you are receiving coverage from one or more of the third parties listed above that pay a part of your out-of-pocket costs for prescription drugs.
  

Sources include:

Medicare Prescription Drug Benefit Manual Chapter 14 – Coordination of Benefits
https://www.cms.gov/files/document/pdmchapt14cobpdf

Understanding True Out-of-Pocket (TrOOP) Costs (CMS Product No. 11223-P Revised October 2015)
https://www.cms.gov/files/document/11223-ppdf (as of 10/28/2024)
(CMS source on 02/22/2016: https://www.cms.gov/ Outreach-and-Education/ Outreach/ Partnerships/ downloads/ 11223-P.pdf)

Fact Sheet: Final CY 2025 Part D Redesign Program Instructions (April 1, 2024)
https://www.cms.gov/files/document/fact-sheet-final-cy-2025-part-d-redesign-program-instructions.pdf

Pharmaceutical Manufacturer Patient Assistance Program Information
https://www.cms.gov/medicare/coverage/prescription-drug-coverage/patient-assistance-program