This year, people on Medicare Part D will not have to pay more than $2,000 in out-of-pocket drug expenditures — and that could lead to huge savings for many people, according to new estimates.
Among the more than 1 million Medicare Part D enrollees expected to reach the new cap on out-of-pocket drug costs this year, 94% will have lower total out-of-pocket drug costs, according to an AARP analysis of 2025 Part D premium data.
AARP estimates that these enrollees will save an average of $2,474 in 2025. That would represent a 48% reduction in total out-of-pocket drug costs (meaning premiums plus cost sharing).
On average, 62% of the enrollees who hit the cap this year will save more than $1,000 on total out-of-pocket drug costs, while 12% will save more than $5,000.
The new cap on annual out-of-pocket drug spending was established by a provision of the federal Inflation Reduction Act of 2022, which went into effect Jan. 1, 2025. While the cap is $2,000 for 2025, it will be adjusted for inflation in future years, so it will increase over time.
Before the Inflation Reduction Act, Medicare Part D enrollees had to pay 5% of all prescription drug costs with no limit. That was true even after out-of-pocket spending exceeded a threshold that put them in catastrophic coverage.
AARP says its findings contradict critics’ claims that recent changes in Part D premiums would lead to higher total out-of-pocket drug costs (premiums plus cost sharing) for enrollees despite the new cap on out-of-pocket spending.
The new cap is going into effect before lower drug prices become available in 2026, thanks to a separate provision of the Inflation Reduction Act. That has caused temporary changes in Part D premiums, according to AARP.
In a summary of its findings, AARP says:
“These results confirm that recent Part D plan premium changes have been more than offset by lower cost sharing for most of this enrollee population. This positive offset will only grow larger as lower prescription drug prices start to become available in 2026 and cause enrollees’ premiums and cost sharing to decrease.”
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