Medicare’s $2,000 Drug Cap Is Getting Expensive — More Than 1 in 5 Seniors Hit It as Drug Spending Heads Toward $346 Billion

Health policy analysts are raising concerns about the rising cost of Medicare’s prescription drug program after more than 1 in 5 Medicare Part D enrollees hit the program’s $2,000 out-of-pocket drug cap in 2025.

The finding, included in a report from congressional Medicare advisers last week, has drawn attention as the redesigned Medicare drug program faces difficult spending tradeoffs, Axios reported Wednesday.

The Inflation Reduction Act limits what seniors pay for outpatient prescription drugs and shifts costs beyond the cap to taxpayers, insurers and drug manufacturers.

MedPAC found that 66% of total Part D drug spending occurred in the catastrophic phase in 2025. GLP-1 drug spending also rose from $300 million in 2024 to $2 billion in 2025, while cancer and diabetes treatments posted double-digit spending growth.

Spending Pressure Builds

American Enterprise Institute senior fellow Benedic Ippolito told Axios that the Inflation Reduction Act gave Medicare drug plans incentives to control spending but "few tools" to do so after beneficiaries reach the cap. He said Congress could modify the program while maintaining financial protections and giving plans more tools to contain spending.

Medicare’s doctors’ services, outpatient care and prescription drug coverage are projected to account for 44% of the federal deficit over the next decade, according to the Cato Institute./p> div class="bz-read-next-block" data-variant="card" data-news-mode="manual" >

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Policy Options Emerge

The federal Part D Premium Stabilization Demonstration is set to end after 2026. The program was designed to limit premium volatility following changes to the Part D benefit under the Inflation Reduction Act.

Medicare is also expanding drug-price negotiations under the IRA. A federal court recently rejected Merck & Co., Inc. (NYSE:MRK)'s challenge to the negotiation program, allowing the government to continue implementing negotiated prices for selected high-cost drugs.

Costs Continue Rising

Medicare’s Hospital Insurance trust fund is projected to become insolvent in 2033, while Part B spending is projected to grow 8.5% annually through 2030 and Part D spending 9.4% annually.

Medicare trustees project Part D spending will rise to about $222 billion in 2026 from $181 billion in 2025 and reach $346 billion by 2035.

Possible changes include adding copays for certain high-cost drugs after beneficiaries reach the cap or changing how the cap is calculated, according to the report.

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