How the Medicare Drug Price Reforms Are Reshaping Part D

Prescription drug costs are often an unexpected drain on retirement savings. Many seniors take multiple medications, and high prescription prices can lead to financial hardship. Recent Medicare drug price reforms are providing relief.

The High Cost of Prescriptions

According to National Health Statistics Reports, 88.6% of U.S. adults aged 65 or older take prescription medication, but 3.6% say they didn’t fill a prescription because of the cost, and 3.4% say they didn’t take their medications as prescribed due to cost.

The problem isn’t a lack of health insurance; most seniors – 82.7% of them – have prescription drug coverage. However, even with insurance, many people face high out-of-pocket costs, and they may not be able to afford their copays and deductibles.

Skipping or rationing prescriptions is risky. In some cases, it can even be lethal, especially when lifesaving medications like insulin are rationed. Medicare Part D reforms are helping Medicare enrollees afford their prescriptions.

Lower Drug Prices

As part of the Inflation Reduction Act, Medicare is negotiating drug prices. According to CMS, the first round of negotiations includes 10 drugs, and lower prices have gone into effect as of 2026, and Medicare enrollees are expected to save around $1.5 billion as a result. In future years, additional prescriptions drugs will be subject to price negotiations.

Medicare has also capped insulin prices at $35 for a one-month supply, with no deductible.

The End of the Donut Hole

Medicare enrollees with high prescription costs were exposed to a coverage gap commonly called the “donut hole.” First, enrollees had to meet the plan’s deductible. Once this was met, enrollees paid their normal cost-sharing amount. However, once they reached a threshold, their out-of-pocket costs increased, and they would continue to pay more until they reached a new threshold for catastrophic coverage. According to MedicalNewsToday, in 2024, the donut hole started when the person paid $5,030, and it didn’t end until their costs reached $8,000.

As of 2025, the donut hole coverage gap has been eliminated. Instead, CMS says enrollees now have a three-phase benefit:

• In this phase, enrollees have to pay the full cost. Some plans have low or no deductibles, and in 2026, the deductible is capped at $615.
• Initial Coverage. In this phase, enrollees pay their normal cost-sharing amount under the terms of the plan.
• Catastrophic Coverage. In this phase, enrollees have met the out-of-pocket cap, and they no longer have to pay anything for covered prescriptions for the rest of the calendar year. In 2026, the out-of-pocket cap is $2,100.

New Payment Options

Starting in 2025, Medicare launched the Medicare Prescription Payment Plan. This payment option helps Medicare enrollees get the prescriptions they need by spreading out the cost.

Imagine your doctor prescribes a new medication, but when you go to the pharmacy to pick it up, you’re told that you have a copay that’s several hundred dollars. You’re living on a fixed budget, and you don’t have the money available, so you can’t fill the prescription. This used to be the only option available to some Medicare enrollees in this situation.

Now the Medicare Prescription Payment Plan offers an alternative. You can fill the prescription, and instead of paying at the pharmacy, the cost will be broken into monthly payments across the rest of the calendar year. You still have to pay the full price, but you can get your prescription immediately and budget the cost over a period of time.

The Medicare Prescription Payment Plan is available with all Part D plans, and participation is voluntary.

Extra Help Expansion

Extra Help is a low-income subsidy program designed to help people with limited income and resources afford Medicare Part D prescription drug coverage. Participants in the program receive help with premiums and out-of-pocket costs.

CMS says the Inflation Reduction Act expanded the Extra Help program. As a result, more people with Medicare may qualify for additional help.

In 2026, the income limit is $23,940 for an individual or $32,460 for a married couple, and the resource limit is $18,090 for an individual and $36,100 for a married couple. If you receive Extra Help, you’ll have a $0 premium and $0 deductible, and you’ll pay up to $5.10 for each generic drug and up to $12.65 for each brand name drug.

If you need Extra Help, you can apply through the Social Security Administration.

Do You Need Help Selecting a Plan?

Medicare Part D reforms are helping enrollees afford prescriptions. If you have questions about Medicare, Heffernan Insurance Brokers can help. Learn more.