This page contains the RDS Cost Threshold and Cost Limit amounts by plan year and also defines the Cost Threshold, Cost Limit, Threshold Reduction, and Limit Reduction terms.
Updates to the annual Cost Threshold and Cost Limit are published at CMS’ Medicare Payment > Medicare Advantage Rates & Statistics > Announcements and Documents website and are updated in the RDS Public Website (PWS) as they become available.
The year in which a Plan Sponsor's RDS plan year ends, as specified in the Plan Sponsor's application, determines the applicable Cost Threshold and Cost Limit amounts for that application. This principle applies to both calendar year plans and non-calendar year plans. Refer to Prepare Cost Data for additional helpful information regarding the preparation of cost data for submission to CMS' RDS Center.
| Plan Year Ending | Cost Threshold | Cost Limit |
|---|---|---|
| 2006 | $250 | $5,000 |
| 2007 | $265 | $5,350 |
| 2008 | $275 | $5,600 |
| 2009 | $295 | $6,000 |
| 2010 | $310 | $6,300 |
| 2011 | $310 | $6,300 |
| 2012 | $320 | $6,500 |
| 2013 | $325 | $6,600 |
| 2014 | $310 | $6,350 |
| 2015 | $320 | $6,600 |
| 2016 | $360 | $7,400 |
| 2017 | $400 | $8,250 |
| 2018 | $405 | $8,350 |
| 2019 | $415 | $8,500 |
| 2020 | $435 | $8,950 |
| 2021 | $445 | $9,200 |
| 2022 | $480 | $9,850 |
| 2023 | $505 | $10,350 |
| 2024 | $545 | $11,200 |
| 2025 | $590 | $12,150 |
Cost Threshold
The Cost Threshold is a federally defined amount of gross covered retiree plan-related prescription drug costs paid by a qualified retiree prescription drug plan and/or by Qualifying Covered Retirees. The amount up to the Cost Threshold is not eligible for subsidy. It is adjusted in the same manner as the annual Medicare Part D deductible and the annual Medicare Part D out of pocket threshold and is adjusted annually as defined in 42 C.F.R. §423.104(d)(1)(ii) and (d)(5)(iii)(B), respectively.
Cost Limit
The Cost Limit is a federally defined amount of gross covered retiree plan-related prescription drug costs paid by a qualified retiree prescription drug plan and/or by Qualifying Covered Retirees. The amount exceeding the Cost Limit is not eligible for subsidy. It is adjusted in the same manner as the annual Medicare Part D deductible and the annual Medicare Part D out of pocket limit and is adjusted annually as defined in 42 C.F.R. §423.104(d)(1)(ii) and (d)(5)(iii)(B), respectively.
Threshold Reduction
The amount below the federally defined Cost Threshold is not eligible for the subsidy. Therefore, Plan Sponsors are not able to claim, for subsidy, this amount of gross covered retiree plan-related prescription drug costs. This ineligible amount is referred to as the Threshold Reduction.
The Plan Sponsor must calculate the Threshold Reduction at the retiree level within an application. The Threshold Reduction amount must be reported to CMS' RDS Center for each Benefit Option, for each month, and will be the sum of all Threshold Reductions for all retirees for that Benefit Option, for that month. Plan Sponsors must keep retiree-level data for audit purposes.
Limit Reduction
The amount in excess of the federally defined Cost Limit is not eligible for the subsidy. Therefore, Plan Sponsors are not able to claim, for subsidy, this amount of gross covered retiree plan-related prescription drug costs. This ineligible amount is referred to as the Limit Reduction.
The Plan Sponsor must calculate the Limit Reduction at the retiree level within an application. The Limit Reduction amount must be reported to CMS' RDS Center for each Benefit Option, for each month, and will be the sum of all Limit Reductions for all retirees for that Benefit Option, for that month. Plan Sponsors must keep retiree-level data for audit purposes.