Medicare drug plans shift costs to patients under IRA

A new out-of-pocket cap under the Inflation Reduction Act (IRA) was meant to lower drug costs for Medicare beneficiaries, but a new white paper from the University of Southern California (USC) Schaeffer Center for Health Policy & Economics suggests the opposite may be true for most patients.

The $2,000 annual cap — which took effect this year — offers real relief for those with the highest drug costs. But, for the vast majority who won’t hit that threshold, rising deductibles and a shift toward coinsurance are quietly driving up what they pay at the pharmacy.

“The new annual cap will provide valuable relief to the small share of beneficiaries with the highest drug spending,” said Erin Trish, Ph.D., co-director of the Schaeffer Center and the report’s lead author. “But our research shows that this comes with a clear tradeoff — most Medicare beneficiaries will likely see their drug costs go up.”

Deductibles climb

Between 2024 and 2025, average deductibles in Medicare Advantage (MA) prescription drug plans nearly quadrupled — from $62 to $224. That spike followed a significant drop in enrollment in generous, zero-deductible plans, which fell from 78% to just 41%.

Traditional stand-alone Part D plans also saw a jump: deductibles increased from $425 to $491, the biggest year-over-year increase since at least 2020.

Copays replaced by coinsurance

At the same time, many plans are moving away from flat copays and instead charging coinsurance — a percentage of a drug’s list price. That shift means patients are now paying a share of the full, often-inflated list price, rather than a fixed dollar amount.

The use of coinsurance in MA plans for common brand-name drugs skyrocketed from 2.6% in 2024 to 27.5% in 2025. Among stand-alone Part D plans, 84.1% of enrollees are now in plans using coinsurance — up from just 9.9% five years ago.

That change can be costly.

For widely prescribed brand-name drugs like Eliquis or Ozempic, a 25% coinsurance rate applies to the list price, not the lower, negotiated price insurers actually pay. Those rebates and discounts are typically kept by pharmacy benefit managers — not passed on to patients.

“Despite the IRA’s many changes, patients are still burdened by a fundamental flaw in the drug pricing system,” Trish said. “Pharmacy middlemen continue to pocket savings while patients are left to shoulder rising list prices.”

Most won’t reach the cap

The IRA’s $2,000 cap is a meaningful protection for the few patients who spend the most on drugs — roughly 5% of Medicare beneficiaries, according to previous modeling. But for everyone else, the combination of higher deductibles and coinsurance means they’ll feel the impact sooner and more frequently.

Plans with low or no deductibles are increasingly scarce, and with more plans using coinsurance, beneficiaries are seeing their out-of-pocket costs rise even when list prices haven’t changed.

While Medicare’s drug price negotiations are set to take effect for select medications in 2026, researchers say those changes might not be enough to reverse current trends. Coinsurance models will still tie patient costs to high list prices, even after negotiated rates kick in.

Trish and co-author Barbara Blaylock, Ph.D., say the solution is to pass negotiated savings directly to patients at the pharmacy counter.

“Providing rebates directly to patients would meaningfully lower their costs, ensuring more people can access therapies,” Trish said.