Prescription drug costs have risen significantly over the past several years. Among drugs that went up in price from January 2022 to January 2023, the average increase was 15.2 percent, and it was 11.5 percent the previous year, according to the most recent data available from the U.S. Department of Health and Human Services. A Commonwealth Fund study found that 14 percent of Medicare beneficiaries didn’t fill a prescription or skipped a dose of their medication because of the cost. “The inability to afford the prescription you need could have long-term implications on your health outcomes,” says Gretchen Jacobson, vice president of Medicare for the Commonwealth Fund.
But the past few years have also brought changes that should make prescription drugs more affordable for many people with Medicare Part D or Medicare Advantage plans. The Inflation Reduction Act of 2022 limited co-payments for covered insulin to $35 per month, eliminated cost sharing for adult vaccines covered by Part D, expanded the Extra Help program (which assists with premiums and co-payments for low-income Medicare beneficiaries), and gave the government the go-ahead to start negotiating prices with drug companies. The dreaded “doughnut hole”—which originally required beneficiaries to pay 100 percent of their drug costs after costs reached a certain level—has disappeared. Instead, your out-of-pocket costs for covered drugs are capped at $2,000 per year, starting in 2025.
“It’s a lot easier to navigate and predict your Part D costs now,” says Caitlin Donovan, senior director of the Patient Advocate Foundation, a nonprofit that provides free case management and financial assistance to people who are diagnosed with serious medical conditions.
But you may still encounter surprises. Only drugs covered by the plan’s formulary are subject to the cap, and plans have been changing their lists of covered drugs. Drug plans have also been adding restrictions to coverage, such as prior authorization and step therapy, which require you to jump through hoops before they’ll cover your medication. And some of the expenses you’ll have to pay before you reach the cap are going up. The maximum deductible for Part D plans increased to $590 in 2025, and you may have to pay a larger percentage of drug costs after you reach your deductible, especially for specialty medications. Premiums, which aren’t included in the cap, also increased for many Part D plans in 2025.
Make the Most of the $2,000 Cap
The $2,000 out-of-pocket cap is a game-changer for people who have high drug costs. HHS projects that about 11.3 million Part D enrollees will meet the cap in 2025. They won’t have to pay anything for covered drugs after that point. But the new rule has some limitations, says Juliette Cubanski, deputy director of KFF’s program on Medicare. Significantly, the $2,000 cap applies only when you’re using your plan and only to drugs that the plan covers, she says.
That changes some cost-saving strategies. For example, in the past, if your Part D plan charged high co-payments for your medications, it made sense to search sites such as GoodRx.com for coupons that could reduce the cost of a drug to less than your insurance co-pay. In that case, you could save money by using cash with a coupon rather than your insurance. But the equation is different with the new cap. Now, if you expect your drug expenses to come close to the $2,000 threshold during the year, it can pay to use your insurance—even if the insurance co-payments are slightly higher—so the expenses can count toward the cap.
“You have to make a prediction about your medications and the out-of-pocket costs,” says Cindy George, senior personal finance editor at GoodRx. “Is it better to stick with the plan, get credit for the out-of-pocket costs and get to the point where it pays 100 percent for your medications?”
Take advantage of the smoothing program. Although the $2,000 cap helps, beneficiaries may have a tough time paying their out-of-pocket drug costs if they have to cover them all at once. For example, people with cancer frequently have a lot of prescription drugs and other expenses and may hit the cap in January, says Robin Yabroff, scientific vice president for the American Cancer Society.
Strategies for Non-Covered Drugs
Because the $2,000 cap applies only to drugs included in your plan’s formulary, it is essential to find out whether your drugs are covered as you choose a plan, says Cubanski. Plans frequently change their formularies, so you might lose coverage for a medication that your plan once covered, she says.You could lose out on other benefits if your drug isn’t covered. For example, the Inflation Reduction Act capped insulin costs at $35 per month, but only for insulins covered by your Part D or Medicare Advantage plan. Not all plans cover all types of insulin, and the plans’ coverage can change, so it is important to check the formulary before choosing a plan, says Diane Omdahl, cofounder of 65 Incorporated, a company that helps people with Medicare decisions.
It can be tricky if you’re prescribed a new medication midyear that isn’t included in your plan’s formulary. Before you leave the doctor’s office, Omdahl recommends using the Medicare Plan Finder to check your plan’s coverage. If your insurance doesn’t cover the drug or has high co-payments, ask your doctor or medication prescriber whether there are other drugs that can meet a similar need, such as a low-cost generic or a therapeutic alternative that costs less under your plan. Specialists prescribing expensive medications generally have resources to help patients navigate the costs.
For cancer patients, for example, “we recommend talking with the oncology care team about other options,” says Yabroff. “If people can’t afford a specific treatment, there may be an alternative to the recommended treatment that is just as effective but may be less expensive.”
Your pharmacist may also be able to help. “Patients can ask their pharmacist for a savings review at any time,” says Monica Prinzing, a CVS Health spokesperson. “CVS pharmacists can review a patient’s prescription regimen and help patients work with their doctor to determine potential alternatives.”
