Many Medicare Beneficiaries Face Higher Out-of-Pocket Drug Costs Under New Legislation

The Inflation Reduction Act (IRA), enacted to make prescription medications more affordable for Americans, has introduced significant changes to Medicare drug coverage. While its primary goal was to reduce financial burdens, recent analysis indicates that most Medicare beneficiaries may actually pay more for their medications out of pocket due to adjustments in Part D plans. According to a recent white paper from the USC Schaeffer Center for Health Policy & Economics, these plans are shifting costs in ways that could result in increased expenses for many patients.

The IRA implemented important protections, such as capping annual out-of-pocket expenses at $2,000 and eliminating the longstanding coverage gap, commonly known as the 'donut hole.' However, these benefits are mostly aimed at beneficiaries with the highest drug spending. For most, particularly those with moderate medication needs who do not reach the cap, the effect may be an increase in their out-of-pocket costs. This is partly because insurance plans are reconfiguring their offerings by raising annual deductibles and replacing fixed co-pays with coinsurance—a percentage of the drug's list price—often resulting in higher costs.

Research from the USC study highlights a marked rise in deductibles for Medicare Advantage drug plans, with average deductibles nearly quadrupling from $62 in 2024 to $224 in 2025. Enrollment in plans with zero deductibles has declined sharply, and more plans are requiring coinsurance for common prescription drugs, especially brand-name medications like Eliquis and Ozempic, linking patient costs to inflated list prices driven by rebates and discounts negotiated by pharmacy benefit managers.

While the IRA introduces measures to negotiate drug prices directly with manufacturers—aiming to lower costs in 2026—the ongoing shift toward coinsurance means many patients may continue paying more than they would have under traditional co-pay models. Experts emphasize that the current system allows middlemen to benefit from inflated list prices, which keeps patient costs high. They suggest that providing rebates directly to patients would be an effective way to reduce their medication expenses and improve access.

In summary, although the IRA has introduced valuable protections, its implementation has led to changes in plan structures that could increase costs for many Medicare beneficiaries. Patients should stay informed about these shifts and consider their options to manage medication expenses.