Millions on Medicare Will Save on Prescription Drugs in 2025

Most Part D beneficiaries who hit new $2,000 cap will see, on average, total out-of-pocket costs cut nearly in half, AARP report finds

Rachel Nania,

AARP

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En español

Published January 16, 2025

illustration of a pill capsule with cash spilling out

Rob Dobi

Gayle Hays has paid north of $8,000 a year for her and her husband’s prescription medications. One drug alone has cost the couple nearly $7,000 annually in out-of-pocket expenses.

But this year is going to be different. A provision in the AARP-backed prescription drug law that went into effect Jan. 1 caps annual out-of-pocket spending on prescription medications at $2,000 in 2025 for people like Hays and her husband who have a Medicare Part D drug plan. As a result, she expects to shell out a lot less at the pharmacy counter in 2025.

“That $2,000 cap,” which will be adjusted annually for inflation, “is fabulous,” says Hays, 75, of Bailey Island, Maine.

How the Rx law is bringing relief to many older adults

For people with Medicare drug plans, the law:

Lowers out-of-pocket costs for insulin to $35 a month
Makes most vaccines cost-free
Caps Part D out-of-pocket prescription drug costs at $2,000 in 2025
Expands Medicare’s low-income subsidy
Allows Medicare to negotiate directly with drug manufacturers to lower the price of some of the costliest and most commonly used prescription drugs
Keeps price hikes in check by requiring drug companies who raise their prices faster than the rate of inflation to pay a penalty to Medicare

Source: Centers for Medicare & Medicaid Services

A 2024 report from AARP found that Hays is one of more than 3.2 million Part D enrollees who is expected to benefit from the new cap in 2025. By 2029, that number will rise to more than 4 million. And new research from AARP released on Jan. 16 finds that the vast majority (94 percent) of people who reach this $2,000 cap will see lower total out-of-pocket costs, meaning premiums plus cost-sharing, this year, saving an average of $2,474 in 2025. That’s a 48 percent reduction in their total out-of-pocket costs.

While average total premiums for Medicare Part D plans decreased slightly for 2025 — and benefits and plan choices remained stable — premiums for some plans increased. AARP’s report, however, shows that any Part D plan premium changes “have been more than offset” by lower cost-sharing for most enrollees who reach the new out-of-pocket spending cap.

“This report shows that most Part D enrollees who hit the new out-of-pocket spending cap this year will see substantial savings even after taking 2025 plan premiums into account, freeing up funds to invest in their families, spend on their broader health needs or simply save to achieve greater financial stability,” says Nancy LeaMond, AARP’s chief advocacy and engagement officer. “AARP was instrumental in Congress passing the prescription drug law of 2022 to lower prices and out-of-pocket costs for Medicare enrollees, and we couldn’t be prouder that the day has finally arrived for this provision to go into effect and that the law is working as intended.”

Gayle Hays at the Curtis Memorial Library in Brunswick, ME.

Michale D. Wilson

Some will save $5,000-plus on medications

More than 50 million adults in the U.S. have a drug plan under Medicare that helps cover the cost of outpatient prescription medications — the kind you fill at a pharmacy and take at home. However, until recently, there’s been no limit on out-of-pocket spending, forcing many older Americans to shoulder a heavy financial burden for necessary drugs, or adopt cost-coping strategies, such as skipping doses or not filling a prescription, to save money.

With an out-of-pocket cap on covered drugs, Medicare enrollees no longer have to face the possibility of unlimited cost-sharing for their medications; rather, many stand to save thousands of dollars.

AARP’s research finds that on average, 62 percent of Part D enrollees who reach the new cap and have lower total out-of-pocket costs will see average savings of more than $1,000 in 2025, and 12 percent are estimated to save more than $5,000.

“AARP was instrumental in Congress passing the prescription drug law of 2022 to lower prices and out-of-pocket costs for Medicare enrollees, and we couldn’t be prouder that the day has finally arrived for this provision to go into effect and that the law is working as intended.”

— Nancy LeaMond, AARP’s chief advocacy and engagement officer

The share of people expected to save varies by state and plan type, AARP’s analysis found. In 33 states and the District of Columbia, 95 percent or more of people who hit the $2,000 spending cap will have lower total out-of-pocket costs in 2025. What’s more, 98 percent of Medicare Advantage prescription drug plan enrollees who reach the new out-of-pocket spending cap will have lower total out-of-pocket costs in 2025, compared with 93 percent of stand-alone prescription drug plan enrollees.

Meanwhile, the small share of Part D enrollees who are expected to reach the $2,000 limit and have higher total out-of-pocket costs in 2025 (6 percent) will face an average of $268 in additional spending, according to AARP’s report. Many could avoid some or all of the increased spending by switching to a different Part D plan during Medicare’s open enrollment, the report notes.

More Rx savings in store for the future

Out-of-pocket savings are only expected to grow, thanks to other provisions in the prescription drug law.

“Once fully implemented, the 2022 drug law is expected to reduce Part D enrollee and program spending by billions of dollars,” says Leigh Purvis, AARP’s prescription drug policy principal and author of the latest report. “This report confirms that enrollees are already seeing overall savings as rollout of the law continues.”

The 2022 prescription drug law also gave Medicare, for the first time ever, the authority to negotiate lower drug prices. Lower negotiated prices for 10 of Medicare’s top drugs will take effect in 2026 and are expected to save beneficiaries a collective $1.5 billion in out-of-pocket expenses in the first year.

These 10 drugs are:

Eliquis (blood thinner)
Jardiance (diabetes, heart failure, chronic kidney disease)
Xarelto (blood thinner)
Januvia (diabetes)
Farxiga (diabetes, heart failure, chronic kidney disease)
Entresto (heart failure)
Enbrel (rheumatoid arthritis, psoriasis, psoriatic arthritis)
Imbruvica (blood cancers)
Stelara (psoriasis, psoriatic arthritis, Crohn’s disease, ulcerative colitis)
NovoLog/Fiasp (diabetes)

Up to 15 more drugs will be chosen by Medicare for price negotiations this year (to take effect in 2027), and additional drugs will be selected every year following.

The medication that previously cost Hays and her husband almost $7,000 a year was selected for the first round of negotiations and will have a lower price in 2026. Hays says she plans to grow her rainy-day fund with the prescription drug savings she’s expecting. She’s also looking forward to seeing the impact these changes will have on others in her community.

“I think that it’s going to be a huge relief for people in our area — whether or not they skip their medications, or they eat, or they have heat,” says Hays, who volunteers with a local organization that helps older adults age at home, called Harpswell Aging at Home. “So for me, that’s huge, that they’ll be able to better meet their basic needs that they can’t meet today with the amount of money that [their medications] cost them out of pocket.”