The result of this 2025 change is that a Medicare Part D beneficiary can actually spend far less than $2,000 to meet the $2,000 annual maximum out-of-pocket prescription drug spending limit (RxMOOP) - depending on the chosen drug plan, retail drug price, and the plan's effective drug cost-sharing.
Understanding the different types of Medicare Part D plan benefits
As background, Medicare drug plans (PDPs and MAPDs) can have four different types of drug coverage benefits with the base benefit being the Defined Standard (DS) benefit released each year by the Centers for Medicare & Medicaid Services (CMS).
In 2025, the annual Medicare Defined Standard (DS) drug
benefit
has a $590 deductible and 25% cost-sharing for all formulary drugs
(you pay 25% of the retail drug cost). The three other types of drug benefit are
either the same as, or even better than, the Defined Standard (DS) benefit and include:
- Basic Alternative (BA),
- Actuarial Equivalent (AE), and
- Enhanced Alternative (EA) Medicare Part D plans.
Question: How does this out-of-pocket (TrOOP) accumulation actually work?
Assume you are in an Enhanced Alternative (EA) Part D drug plan (like the AARP Medicare Rx Preferred from UHC (PDP) - S5921-412) - and you are in your plan's Initial Coverage phase - and your total drug spending exceeds $590 (including what others have spent on your behalf).
- Example 1: You purchase a Tier 2 drug with a $100 retail cost and your EA plan has a $10 copay - you get $15 additional credit toward your TrOOP.
Your effective cost-sharing for your EA plan is 10% ($10/$100) and since 10% is less than the 25% standard cost-sharing of a Defined Standard plan – you receive the TrOOP credit of the DS plan (because the DS plan cost-sharing of $25 is greater than the EA cost sharing of $10).
Key point: You get TrOOP credit for the "greater of" either the cost-sharing under either the EA or the DS plan.
Result: You spend $10 under the EA plan and receive DS plan TrOOP credit for $25.
- Example 2: You purchase a drug with a $100 retail cost and your EA plan has a $30 copay - you get no additional credit toward your TrOOP. Your effective cost-sharing for the EA plan is 30% ($30/$100) and since 30% is greater than the 25% cost-sharing of a Defined Standard plan – you get the TrOOP credit of your Enhanced Alternative plan (because the $30 EA plan copay is greater than the DS cost sharing of $25).
Which cost-sharing accumulates toward TrOOP?
You get TrOOP credit for the "greater of" either the cost-sharing under either the EA or the DS plan.
Result: You spend $30 under the EA plan and receive EA plan TrOOP credit for $30. (There is no additional amount counted toward your total out-of-pocket spending.)
Question: How do I see if a Medicare drug plan has an Enhanced Alternative benefit?
You can see whether a Medicare drug plan has Enhanced Alternative Part D coverage in our Medicare Part D plan finder and Medicare Advantage plan finder (accented with light green background).
The Ozempic® Example: You purchase a Tier 3 drug with a $900 retail cost and your EA drug plan has a $47 copay.
(1) First step: Does your chosen 2025 Medicare drug plan have Enhanced Alternative benefits?
Assume you are interested in joining the "AARP Medicare Rx Preferred from UHC (PDP) - S5921-412" Medicare drug plan, you can use our Medicare Part D drug finder to confirm that the plan has Enhanced Alternative (EA) coverage. Starting in PDP-Finder.com/UT#results you see:
(2) Next, determine whether your chosen drug is covered by the Medicare drug plan.
You click on "Browse Formulary" link in the right column - then you can the browse alphabetically through the formulary (click on "O") for Ozempic. You will see that the Medicare drug plan covers three variations of Ozempic (you can also see that the drug is subject to Prior Authorization and Quantity Limit restrictions).
(3) What is the average or estimated retail price of your chosen Part D drug across all Part D plans in your area?
Choose your desired drug and if you click on the small icon next to the drug name, you will go to the the drug finder Drug Finder where you can see how other plans in the area cover this same drug - and also see the average retail drug price (prices vary depending on the actual chosen pharmacy).
With this particular formulary drug, we can see that the the drug finder Drug Finder shows the average retail drug price as "tbd" (to be determined) as pricing data for this specific Part D plan has not yet been received. However, based on the other drug plans in the state or region, we can assume the retail price for this drug is around $900 per month.
Note on retail drug pricing: When we visited the Medicare Plan Finder (October 22, 2024) and chose pricing across three national pharmacies, the actual retail price for our chosen Ozempic variation (NDC 00169413013) ranged from $929 to $991.94. However, the results of our example are the same with a $900 retail drug price estimate.
March 18, 2025 Update: As of this date, the pricing data shows the retail drug price as $968.80 for "OZEMPIC 1 MG/DOSE (4 MG/3 ML) PEN INJECTOR (3 MLS ) (NDC: 00169413013)" under this AARP Medicare Rx Preferred plan. However, this example will continue with a retail cost of $900.
Tip: Remember, retail drug prices can change almost continuously through the year - and will change throughout the annual Open Enrollment Period - so if you check back in a month, you may see different results on the Medicare.gov site and our this site. com website.
(4) Determine which cost-sharing (Enhance Alternative or Defined Standard) will accumulate as TrOOP.
Which cost-sharing accumulates toward TrOOP?
You get TrOOP credit for the "greater of" either the cost-sharing under either the EA or the DS plan.
Our next step is to determine the effective percent cost-sharing for this drug covered by the AARP Enhanced Alternative Part D plan, again assuming a $900 retail cost with a $47 Tier 3 copay: $47/$900 = 5.2% which is less than the 25% cost-sharing of a Defined Standard plan. Therefore, a Medicare beneficiary would pay the plan's $47 copay (5.2%) and get the Defined Standard benefit cost-sharing (25%) credited toward their out-of-pocket spending for each purchase - after meeting the DS plan's deductible.
(5) Calculating out-of-pocket spending and TrOOP accumulation for the first Part D drug purchase of the year.
The AARP Enhanced Alternative plan has a $0 deductible and $47 Tier 3 copay, so for the first drug purchase of the year, the person would pay the $47 Tier 3 copay and would receive the Defined Standard out-of-pocket spending credit for:
(1) $590 for meeting the DS plan deductible plus
(2) 25% of the retail drug price that straddles into the Initial Coverage phase ($900-$590) * 25%) or $590 + $77.50
For a total TrOOP credit of $667.50.
Result for January drug purchase
For the first purchase of the year, the person pays $47 for a $900 drug and gets TrOOP credit for $667.50 toward meeting the $2,000 annual maximum out-of-pocket prescription drug spending limit (RxMOOP). (6) Calculating how TrOOP accumulates for additional Part D drug purchases.
After the first drug purchase, the Medicare beneficiary continues to pay the $47 Tier 3 copay for the $900 drug and will receive the Defined Standard out-of-pocket spending credit for ($900 * 25%) for a total TrOOP credit of $225.
Results for February through June drug purchases
The person continues to pays $47 for the $900 drug and receives TrOOP credit for $225 toward meeting the $2,000 annual maximum out-of-pocket prescription drug spending limit.
Calculating how TrOOP accumulates for July
The Medicare beneficiary would make the final $47 Tier 3 copay for the $900 drug in July and will receive the Defined Standard out-of-pocket spending credit for $207.50 as this final payment straddles from the Initial Coverage phase into Catastrophic Coverage where the beneficiary will have no additional cost-sharing.
Result for July drug purchase
The person continues to pays $47 for the $900 drug and receives TrOOP credit for $207.50 toward meeting the $2,000 annual maximum out-of-pocket prescription drug spending limit.
August through December Note
For August through December, the beneficiary would have a $0 cost for each $900 prescription. However, the beneficiary could also "smooth" the $47 per month January through July spending over the course of the entire year by opting into their plan’s “Medicare prescription payment plan” (MPPP or M3P).
(7) Calculating this person's total annual cost for this $12,000 drug:
Annual cost calculation for Enhanced Alternative (EA) plan with Defined Standard (DS) TrOOP accumulation.
Using our this site Out-of-pocket cost calculator - and based on the 25% cost-sharing Defined Standard (DS) benefit - you can see how this person would move through their coverage before reaching the $2,000 maximum out-of-pocket spending limit (RxMOOP).
Using a retail drug cost of $900 per month and a $590 deductible with 25% cost-sharing, the person reaches the $2,000 RxMOOP in July (7 months).
For the year, this AARP EA plan member would pay 7 months of $47 copay = $329 and reach the $2,000 maximum out-of-pocket spending limit in July.
| Enhanced Alternative (EA) Medicare drug plan - what the beneficiary actually spent | Actual accumulated total paid out-of-pocket by beneficiary | Defined Standard (DS) Medicare drug plan - counted toward out-of-pocket (TrOOP) | Total TrOOP accumulated toward RxMOOP |
|
| January | $47 | $47 | $667.50 | $667.50 |
| February | $47 | $94 | $225.00 | $892.50 |
| March | $47 | $141 | $225.00 | $1,117.50 |
| April | $47 | $188 | $225.00 | $1,342.50 |
| May | $47 | $235 | $225.00 | $1,567.50 |
| June | $47 | $282 | $225.00 | $1,792.50 |
| July | $47 | $329 | $207.50 | $2,000.00 |
| August - December |
$0 | $329 | $0 | $2,000 |
The Medicare.gov Plan Finder also shows that the person will have an annual drug cost of $329. However, (as of October 22, 2024) not much explanation is provided as to how the person reached the annual $2,000 maximum out-of-pocket limit by spending only $329 on approximately $10,800 to $12,000 worth of Ozempic (again, the out-of-pocket spending results are the same using the assumed $900 retail cost or the higher CVS Pharmacy retail price of $991.94).
CMS Fact Sheet: "CMS Releases 2025 Medicare Part D Bid Information and Announces Premium Stabilization Demonstration"
https://www.cms.gov/newsroom/fact-sheets/cms-releases-2025-medicare-part-d-bid-information-and- announces-premium-stabilization-demonstration
CMS Press Release, "Medicare Advantage and Medicare Prescription Drug Programs to Remain Stable as CMS Implements Improvements to the Programs in 2025" https://www.cms.gov/newsroom/press-releases/medicare-advantage-and-medicare-prescription- drug-programs-remain-stable-cms-implements-improvements
CMS Fact Sheet, "Medicare Advantage and Medicare Prescription Drug Programs to Remain Stable as CMS Implements Improvements to the Programs in 2025" https://www.cms.gov/newsroom/fact-sheets/medicare-advantage-and-medicare-prescription-drug- programs-remain-stable-cms-implements-improvements
"Final CY 2025 Part D Redesign Program Instructions Fact Sheet "
https://www.cms.gov/newsroom/fact-sheets/final-cy-2025-part-d-redesign-program-instructions-fact-sheet
"Final CY 2025 Part D Redesign Program Instructions"
https://www.cms.gov/files/document/final-cy-2025-part-d-redesign-program-instructions.pdf
"Prescription Drug Event Record Reporting Instructions for the Implementation of the Inflation Reduction Act for Contract Year 2025"
https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/PDE_Record_Reporting_ Instructions_for_the_Implementation_of_the_IRA_for_Contract_Year_2025_508_G.pdf
** Special thanks to:
Karcher, J., Magnusson, J. S., & Robb (Klein), M. (August 27, 2024). "Out of whose pocket? Many beneficiaries will spend less than expected to reach the IRA’s new $2,000 out-of-pocket spending limit"
https://www.milliman.com/en/insight/out-of-whose-pocket-inflation-reduction-act