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How Changes to Medicare Could Help You Save on Prescriptions

Written by:

Jason Kolkey

6 min read

Key Takeaways

The 2022 Inflation Reduction Act included several measures to lower drug prices for people on Medicare.
People on Medicare pay no more than $35 for a monthly supply of insulin.
It’s now easier to qualify for the Extra Help program, which makes Medicare Part D prescription coverage more affordable.
As of 2025, there’s a $2,000 cap on out-of-pocket costs for drugs covered by a Medicare Part D or Medicare Advantage plan.
Medicare is negotiating with pharmaceutical companies to lower the prices of drugs.

The Inflation Reduction Act, passed by Congress in 2022, made changes to Medicare that could help beneficiaries save money on prescription drugs. If that’s news to you, you’re far from alone.

The health policy research organization KFF found in a 2023 poll that most U.S. adults over 65 said they didn’t know about any of these policies intended to reduce spending for people on Medicare:

A cap on the Medicare copay for insulin.
More subsidies to help pay for Medicare Part D prescription drug coverage.
A cap on annual out-of-pocket costs under Part D plans.
Negotiations with pharmaceutical companies over the prices of certain drugs covered by Medicare.

Let’s take a closer look at these updates so you can make the most of the benefits that are available to you.

How Medicare Helps Pay for Drugs

When you enroll in Medicare, one of the critical decisions you make is about prescription drug coverage. Original Medicare (the federal insurance program that consists of Medicare Parts A and B) provides you with hospital and medical insurance, but only helps to pay for medications under very limited circumstances.

To get coverage for the vast majority of prescription drugs, you’ll need to enroll separately in a Medicare Part D plan that’s administered by a private insurance carrier. For most standalone Part D plans, your costs will include:

Premiums: A monthly payment that varies by plan; the Centers for Medicare and Medicaid Services (CMS) projected an average of $55.50 for 2024.
Deductible: The amount of your prescription costs you’re responsible for paying each year before the Part D plan starts covering its share; in 2024, the maximum possible annual deductible is $545.
Copayments or coinsurance: The amounts you’re charged for prescriptions after meeting the deductible, which vary depending on the drug.

As an alternative, you may explore what Medicare Advantage plans (also known as Medicare Part C) are available from private insurers in your area. These plans match the benefits from Parts A and B, and most add supplemental benefits. Medicare Advantage usually includes Part D coverage, often at a lower cost than a standalone plan.

Limiting the Cost of Insulin

The Centers for Disease Control and Prevention (CDC) report that more than 11% of the U.S. population live with diabetes. For many of these people, insulin is essential to manage their blood glucose levels, and high prices can put their health at risk. That’s why the Inflation Reduction Act established a $35 cap on out-of-pocket costs for a one-month supply of insulin purchased under a Medicare plan.

The price cap took effect for insulin covered by Part D prescription drug plans (including injectable insulin, inhaled insulin, and disposable “patch” pumps) on January 1, 2023. As of July 1, 2023, the rule also applied to insulin administered with a traditional pump, which is covered under Original Medicare Part B’s benefits for durable medical equipment.

The U.S. Department of Health and Human Services (HHS) estimated that the price cap would affect the prices paid by 1.5 million Medicare beneficiaries, saving them an average of $500 a year.

Increasing Access to Extra Help

If you’re enrolled in Medicare, below a certain level of income, and have limited resources, you may qualify for Extra Help, also called the Low-Income Subsidy (LIS). This program makes Part D more affordable with $0 monthly premiums, $0 deductibles, and lower coinsurance on drugs.

Before 2024, it was possible to qualify for partial Extra Help benefits. Now, CMS projects that 300,000 more people will instead receive the full subsidies if they:

Have an income under 150% of the federal poverty line (less than $21,870 for an individual or $29,580 for a married couple in 2023)
Have limited resources (less than $16,600 for an individual or $33,240 for a married couple in 2023). Your resources are how much you have in savings, checking, and retirement accounts, plus any stocks or bonds.

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Capping Out-of-Pocket Costs

As of 2023, when people on Medicare Part D plans had drug costs over a certain threshold for the year they first entered a coverage gap (often called the donut hole), which meant the beneficiary paid up to 25% of the cost of brand-name drugs. Eventually, costs could reach a catastrophic phase, when the beneficiary was responsible for 5% coinsurance on all drug costs above that level for the rest of the year.

The Inflation Reduction Act changed catastrophic coverage, eliminating the coinsurance requirement and lowering the out-of-pocket maximum. As a result, people enrolled in Part D paid no more than $8,000 out of pocket for their covered drugs in 2024.

In 2025, the out-of-pocket cap lowers to $2,000, and there’s no coverage gap. Going forward, the out-of-pocket limit will be adjusted annually based on how much Part D plans spend on drugs each year.

Negotiating Drug Prices

Medicare now negotiates with pharmaceutical makers to lower the prices of particular medications, starting with a list of 10. New prices will go into effect in in 2026 for those initial drugs, which include:

Eliquis: Used to prevent blood clotting and lower the risk of stroke.
Enbrel: Used to treat rheumatoid arthritis.
Entresto: Used to treat heart failure.
Farxiga: Used to treat type 2 diabetes.
Fiasp: Insulin used to treat diabetes.
Imbruvica: Used to treat blood cancers.
Januvia: Used to lower blood sugar for people with type 2 diabetes.
Jardiance: Used to lower blood sugar for people with type 2 diabetes.
NovoLog: Insulin used to treat diabetes.
Stelara: Used to treat Crohn’s disease.
Xarelto: Used to prevent blood clotting and lower the risk of stroke.

In the future, Medicare intends to negotiate the costs of a growing list of drugs: 15 a year in 2027 and 2028 before rising to 20 a year beginning in 2029.

According to KFF, reducing the prices that Medicare pays for various medications may, in turn, lower out-of-pocket costs for consumers. The new policy will also require Part D plans to expand the lists of drugs, called formularies, that they cover, potentially giving beneficiaries access to a wider range of formulations and dosages.

By understanding the recent changes to how Medicare helps pay for drugs, you can make more informed decisions about your own healthcare. Whether you choose to enroll in a standalone Part D plan or in a Medicare Advantage plan, these new policies could have a meaningful effect on both your healthcare and financial well-being.