Skip to main content
Open Access Publications from the University of California


UCLA Previously Published Works bannerUCLA

Impact of an annual dollar limit or "cap" on prescription drug benefits for Medicare patients.

  • Author(s): Tseng, Chien-Wen;
  • Brook, Robert H;
  • Keeler, Emmett;
  • Mangione, Carol M
  • et al.

Annual dollar limits, or "caps," on drug benefits are common in Medicare managed care (Medicare + Choice) and have been part of several proposals for a national Medicare drug benefit.To determine how cap levels affect the percentage of patients exceeding the cap and their out-of-pocket drug costs and to identify the medications that contribute most to prescription costs.Cross-sectional analysis of 2001 pharmacy claims data from a large Medicare + Choice plan in a mature market with caps of 750 dollars to 2000 dollars per year applied to the plan's share of prescription costs.Patients who filled at least 1 prescription in 2001 (n = 438 802).Percentages of patients exceeding caps, identified from prescription claims; out-of-pocket patient costs before exceeding caps, calculated from patients' co-payments; and out-of-pocket patient costs after exceeding caps, estimated from total prescription costs before exceeding the cap. Each unique drug was ranked by total expenditures, which included spending by patients who exceeded caps and by the plan for that drug.A total of 22%, 14%, and 4% of Medicare patients exceeded caps of 750 dollars, 1000 dollars, and 2000 dollars, respectively. Across caps, patients faced a potential 2- to 3-fold increase in median out-of-pocket costs after exceeding caps (179 dollars-305/mo dollars) to continue the same prescription use as before exceeding caps (79-100/mo dollars). For patients who exceeded a cap of 750 dollars, yearly out-of-pocket drug costs ranged from 564 dollars to 4201 dollars (5th-95th percentiles). Fifteen of the 20 medications with the highest total prescription expenditures for patients who exceeded the cap were for chronic conditions. Seven had lower-cost generic versions or a generic medication available in the same treatment class.At lower caps, a substantial proportion of Medicare patients exceeded their annual drug benefit. To continue the same medication use as before exceeding caps, these patients faced potentially high increases in out-of-pocket costs for medications used primarily to treat chronic conditions. Generic options were not available for many of these drugs.

Many UC-authored scholarly publications are freely available on this site because of the UC's open access policies. Let us know how this access is important for you.

Main Content
For improved accessibility of PDF content, download the file to your device.
Current View