New Medicare Rules Will Make Prescription Drugs a Lot Cheaper in 2025

New cost-saving provisions of the Inflation Reduction Act took effect Wednesday for Medicare enrollees. Chief among them: Out-of-pocket costs for prescription drugs are now capped at $2,000 through Medicare Part D, the optional prescription plan associated with the federal insurance program for people over 65 and younger Americans with disabilities.

“Before I took office, people with Medicare who took expensive drugs could face a crushing burden, paying $10,000 a year or more in copays for the drugs they need to stay alive,” President Joe Biden said in a statement Tuesday, touting the benefits of one of the largest legislative packages of his presidency. “This week, we take another step closer to an America where everyone can afford the quality health care they need.”

According to the Centers for Medicare & Medicaid Services (CMS), about 66 million Americans are enrolled in Medicare, and about 52 million of them have Part D prescription coverage. Most enrollees spend far less than $2,000 a year on their prescriptions, but officials estimate the new cap will help 19 million people save an average of $400 a year.

The cap works automatically. Once someone’s out-of-pocket drug expenses total $2,000 in one year, they won’t need to pay anything else for the rest of the year. For folks who meet that threshold early in the year, prescription drug costs can now be broken up into payments over the year instead of when they happen to make the charges easier to manage.

Typical monthly premiums for Part D — which do not apply toward the out-of-pocket limit — are about $37 in 2025.

“Substantial relief from high drug prices” is on the way for people with Medicare, CMS Administrator Chiquita Brooks-LaSure said in a statement.

That’s because, in addition to the out-of-pocket cap for the Part D plan, dozens of drugs are getting cheaper in 2025 for enrollees with health insurance coverage through Part B. A separate provision of the Inflation Reduction Act helps Medicare beneficiaries when drugmakers hike prices above the rate of inflation.

CMS says that pharmaceutical companies did this for 64 drugs, including treatments for cancer, osteoporosis, and substance use disorder, and as a result, must pay Medicare a rebate for the price hikes. The rebates will go toward subsidizing the cost of the affected drugs for enrollees through March 31. Each quarter, CMS re-calculates which drugs are included in the rebate program.

Over 853,000 people in Part B will benefit from the quarterly rebate starting this month, CMS says, with some saving as much as $10,818 per day for specialty drugs.

“This will be life-changing for people who have been living with high drug costs,” Brooks-LaSure said.

Already, the Inflation Reduction Act has capped insulin costs for Medicare beneficiaries at $35 a month, and that will remain in effect throughout 2025.

Beginning in 2026, lower prices for 10 drugs used to treat diabetes, arthritis, heart failure, cancer and other conditions will go into effect after Medicare negotiated with drugmakers for the first time ever. The out-of-pocket savings for Americans are expected to total $1.5 billion next year, and the cheaper drugs will save the Medicare program $6 billion.

Later this year, Medicare is expected to finalize the next batch of drugs to negotiate — 15 this time — and the new prices for them will go into effect in 2027.