Summary:
True out-of-pocket (TrOOP) costs refer to your Medicare Prescription Drug Plan’s maximum out-of-pocket amount. This is the maximum amount you would need to spend each year on medications covered by your prescription drug plan before you reach the “catastrophic” level of coverage. The TrOOP amount for 2024 is $8,000, meaning that once you paid that much out-of-pocket, your drug plan’s catastrophic coverage kicks in to cover most of your covered prescription drug costs for the rest of the year. Read below to understand which out-of-pocket expenses count toward the TrOOP amount.
You may want to keep track of how much you spend on your prescription medications throughout the year. Your plan also keeps track of this, however, so they know once you have reached the TrOOP limit. You should receive an Explanation of Benefits (EOB) in the mail each month that details your TrOOP costs for the year so far.
If you switch from one prescription drug plan to another, the TrOOP amount transfers across plans so that you do not have to start over in the event that you have to change drug plans.
TrOOP examples and exclusions
Medicare defines TrOOP as whatever amount you pay out-of-pocket for your prescription medications that count toward your prescription drug plan’s out-of-pocket threshold. This amount resets to zero at the start of each year. The TrOOP amount includes your annual deductible amount. It also includes the copayment or coinsurance amount that you pay for each individual prescription that’s covered by your plan. If/when you enteryour plan’s coverage gap(the point in your drug coverage where you pay more for your medications out of your own pocket, before the catastrophic coverage phase kicks in), theseMedicare costsare generally applied to your TrOOP also, unless the prescription is not covered by your plan’s formulary (a list of covered drugs), and therefore has not been allowed into your coverage through an exception rule.
State Pharmaceutical Assistance Programs (SPAPs) are available in some states and might count toward your TrOOP. These programs may help with your prescription drug costs.
This may also count toward TrOOP: AIDS Drug Assistance Programs (ADAPs), which only cover HIV/AIDS-related medications
There are other scenarios where out-of-pocket spending maynotbe applied to your TrOOP. If you purchased the prescription outside the U.S. and its territories or if the drugs are not covered by Medicare Part D at all (such as weight loss or weight gain agents), thoseMedicare costswill not count towards your TrOOP.
Vitamins are not covered, and if a group health plan, such as the Federal Employees Health Benefit Program, makes payments on your behalf, then it does not count as an out-of-pocket expenditure and therefore will not be applied to your TrOOP. This is also true for any third-party groups that may be legally obligated to pay for your drug costs and also formanufacturer’s Pharmaceutical Assistance Programs (PAPs) that circumvent the Part D benefit.
If you belong to other government assistance programs, like TRICARE, Medicaid, 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/or black lung benefits, then that paid assistance does not count towards your TrOOP.
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What is the TrOOP for 2023?
The TrOOP (True Out-of-Pocket) limit for Medicare Part D in 2023 is $7,050, according to the Centers for Medicare & Medicaid Services (CMS). This is the maximum amount an individual enrolled in Medicare Part D can spend on covered drugs out-of-pocket before entering catastrophic coverage, where cost-sharing is reduced.
The TrOOP limit is calculated by adding up the amount the beneficiary has paid in deductible, copayments, and coinsurance for their Part D drugs during the plan year.
Once the TrOOP limit is reached, the beneficiary will pay only a small coinsurance or copayment for their drugs for the rest of the year. This limit can provide financial protection for beneficiaries who take many expensive drugs throughout the year.
What payments count toward TrOOP costs?
The following payments will counttoward a person’s TrOOP costs:
- The total amount a person pays for covered prescriptions before drug plan takes over payments
- Payments a beneficiaries make for a covered prescription drug during his or her plan’s coverage gap
- The person enrolled in a Medicare drug plan (including payments from his or her Medical Savings Account (MSA), Health Savings Account (HSA), or Flexible Spending Account (FSA)
- Family members or friends
- Qualified State Pharmacy Assistance Programs (SPAPs)
- Medicare’s Extra Help (low-income subsidy)
- 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 operating outside Part D)
- Drug manufacturers providing discounts under the Medicare coverage gap discount program
- Indian Health Service (IHS)
- AIDS Drug Assistance Programs (ADAPs)
What payments don’t count toward TrOOP costs?
The following payments don’tcount toward TrOOP costs if they’re made or reimbursed to the person enrolled in a Medicare drug plan:
- Cost of a drug paid by a Medicare drug plan
- Monthly drug plan premium
- Prescription drugs purchased outside the U.S. and its territories
- Prescription drugs excluded from the definition of Part D drug
- Over-the-counter drugs or most vitamins
- Group health plans such as the Federal Employees Health Benefit Program (FEHBP)
- 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
- Patient Assistance Programs (PAPs) operating outside the Part D benefit
Once you have reached your TrOOP amount, Medicare covers most of your prescription drug costs for the rest of the year. You’ll typically pay a small copayment or coinsurance amount.
