Medicare’s drug price cap may not help all beneficiaries

Medicare’s long-awaited $2,000 annual out-of-pocket (OOP) cap for prescription drugs has officially taken effect. The cap, enacted as part of the Inflation Reduction Act (IRA) of 2022, promises crucial relief for the small percentage of Medicare beneficiaries who face catastrophic drug costs. 

However, a new white paper reveals that most won’t meet the catastrophic threshold, raising concerns that the cap may offer limited relief amid broader cost-sharing changes.

At the center of the IRA’s reforms is a $2,000 cap on out-of-pocket prescription drug costs for all Medicare Part D beneficiaries. Before this change, patients could spend up to $3,800—or more—with no upper limit. The new cap was hailed as a historic win for seniors facing sky-high prices for life-sustaining medications.

But the research finds that only about 5% of non-low-income-subsidy beneficiaries are likely to reach that cap. For the remaining 95%, new plan designs may result in increased costs at the pharmacy counter.

Shifting financial burden

In response to their changing financial responsibilities under the IRA, Medicare Advantage Prescription Drug plans (MA-PDs) and stand-alone Medicare Prescription Drug Plans (PDPs) are adopting strategies that shift more costs to beneficiaries:

• Deductibles Climb Sharply: The average deductible for MA-PDs skyrocketed from just $62 in 2024 to $224 in 2025. In comparison, PDPs continued their gradual trend upward, rising to $491 on average.
• Zero-Deductible Plans Decline: The share of MA-PDs with a $0 deductible plummeted in 2025, reversing a long-standing trend of low upfront costs in these plans.
• Copayments Give Way to Coinsurance: Rather than flat-dollar copayments, more plans are turning to percentage-based coinsurance, tying patients’ costs to undiscounted drug list prices. This change exposes patients to inflated costs, especially for drugs with steep manufacturer rebates.
  • Among MA-PDs, only 2.6% used coinsurance for preferred brand drugs in 2024. That number surged to 27.5% in 2025.
  • For non-preferred drugs, coinsurance use jumped from 11% to 56.1% of MA-PDs in a single year.

The real impact on seniors

These plan design changes mean that although fewer people will hit catastrophic spending levels thanks to the new cap, most beneficiaries may see higher monthly costs for common medications.

Drugs like Eliquis—used to prevent strokes and blood clots—illustrate the stakes. Plans with copayments averaged $39–$46 per month for the drug, but coinsurance pushed monthly costs to $92–$121, based on the drug’s list price. 

That list price doesn’t reflect typical 45%–50% rebates negotiated by manufacturers, savings that are not passed on to beneficiaries.  Such pricing dynamics not only strain household budgets but also threaten medication adherence, with research linking higher out-of-pocket costs to skipped doses and worsening health outcomes.

The white paper notes that these shifts began in PDPs as early as 2020 but have accelerated sharply among MA-PDs in 2025. This alignment between plan types is likely a strategic response to the IRA’s implementation, specifically how out-of-pocket costs are calculated against the $2,000 cap.

Because the cap is based on what a beneficiary would have paid under the standard benefit – not necessarily their actual spending in enhanced plans – insurers may see little incentive to maintain low deductibles or copayment structures.

Looking ahead

The next wave of Medicare cost reform is already on the horizon. In 2026, the Centers for Medicare & Medicaid Services (CMS) will implement negotiated pricing for ten high-cost drugs. These prices are expected to be significantly lower than current list prices, which could reduce coinsurance-based out-of-pocket expenses, though that relief is still a year away.

The findings raise questions about the efficacy of the IRA’s goals in its current implementation. While the $2,000 cap is a milestone, the paper’s authors conclude that the continued use of cost-sharing mechanisms that rely on inflated list prices undermines affordability for many.