TrOOP stands for True Out-of-Pocket costs, and it’s Medicare’s way of tracking how much you’ve personally spent on prescription drugs through your Part D plan. Once your TrOOP spending hits a set threshold, you move into catastrophic coverage, where your costs drop dramatically. For 2025, that threshold is $2,000, a major reduction from the $8,000 threshold in 2024.
How TrOOP Works in Part D
Medicare Part D prescription drug coverage is structured in phases. You start by paying a deductible (if your plan has one), then move into an initial coverage period where you share costs with your plan, and eventually you may enter a coverage gap. Throughout all of these phases, Medicare is keeping a running tally of your qualifying out-of-pocket spending. That tally is your TrOOP balance.
The purpose of this tracking is simple: once your TrOOP balance reaches the annual threshold, you enter the catastrophic coverage phase. Before 2025, reaching that phase still left you paying roughly 5% of drug costs for the rest of the year with no cap. Starting in 2025, the $2,000 threshold functions as a hard cap. Once you hit it, you pay $0 for covered Part D drugs for the remainder of the calendar year. The threshold resets every January 1.
What Counts Toward TrOOP
Not every dollar you spend on medications moves you closer to that threshold. Only specific types of payments count:
- Your annual deductible: whatever you pay out of pocket before your plan starts covering a share of costs.
- Copays and coinsurance: the amount you pay for each covered prescription once your plan kicks in during the initial coverage period.
- Coverage gap spending: any payments you make for covered drugs while in the coverage gap (sometimes called the “donut hole”), if your plan has one.
These are all payments you make directly for drugs that your Part D plan covers. That’s the key concept: TrOOP tracks your personal spending on covered prescriptions.
What Does Not Count Toward TrOOP
This list is longer than most people expect, and it’s where confusion usually happens. Your monthly Part D premium does not count toward TrOOP, no matter how much you pay. Money spent on drugs purchased outside the United States doesn’t count either.
Spending on drugs your plan doesn’t cover, including over-the-counter medications and most vitamins, won’t move your TrOOP balance. Even drugs that are excluded from Part D’s legal definition, like hair growth medications, don’t count, even if your plan happens to cover them as a supplemental benefit.
Payments made on your behalf by certain third parties also don’t count. This includes:
- Employer or union retiree coverage and group health plans like the Federal Employees Health Benefit Program
- Government programs such as Medicaid, TRICARE, Veterans Affairs, and Workers’ Compensation
- Patient Assistance Programs that operate outside the Part D benefit
- Other insurance or any third party with a legal obligation to pay your drug costs
The logic here is that TrOOP is meant to measure what you’re genuinely paying out of your own pocket, not what other programs are paying for you.
Manufacturer Discounts and TrOOP
This is one area that changed significantly. Before 2025, drug manufacturer discounts in the coverage gap counted toward your TrOOP balance, helping you reach the catastrophic threshold faster even though you weren’t the one paying. Starting in 2025, manufacturer discounts under the new Manufacturer Discount Program no longer count toward TrOOP. The discount still reduces what you pay at the pharmacy, but it doesn’t help you accumulate spending toward the $2,000 cap.
The $2,000 Cap Starting in 2025
The Inflation Reduction Act of 2022 reshaped Part D’s benefit structure, and TrOOP is at the center of those changes. In 2023, beneficiaries had to accumulate $7,400 in TrOOP spending before reaching catastrophic coverage, and even then they still owed about 5% of drug costs with no upper limit. In 2024, the threshold rose to $8,000.
Starting in 2025, the threshold drops to $2,000, and once you reach it, your cost sharing falls to $0 for the rest of the year. This is a hard annual cap on out-of-pocket prescription drug spending for anyone enrolled in Part D. The $2,000 amount will be adjusted for inflation in future years.
For people taking expensive medications, particularly specialty drugs for conditions like cancer, autoimmune diseases, or hepatitis C, this change can save thousands of dollars per year. Someone who previously spent $8,000 or more before reaching catastrophic coverage now stops paying after $2,000.
The Payment Smoothing Option
Also new for 2025, the Medicare Prescription Payment Plan lets you spread your out-of-pocket drug costs across the year in monthly installments rather than paying large amounts upfront. If you opt into this program, you pay $0 at the pharmacy counter, and your plan bills you monthly instead.
The important detail: joining this payment plan does not change how your TrOOP accumulates. Your out-of-pocket costs still count as incurred on the date each prescription claim is processed, not when you actually pay the monthly bill. So your TrOOP balance builds at the same pace it would without the payment plan. The program only changes the timing of when cash leaves your wallet, not how Medicare tracks your spending toward the $2,000 cap.
How to Check Your TrOOP Balance
Your Part D plan tracks your TrOOP automatically. You can see your running balance on the Explanation of Benefits statements your plan sends after you fill prescriptions. Most plans also let you check this online or through a member services phone call. Keeping an eye on your TrOOP balance tells you how close you are to reaching the annual cap and paying nothing for covered drugs the rest of the year.