New for 2025: A cap on drug prices for nearly 2 million older Michiganders

• Some Michigan’s Medicare beneficiaries will see cost savings in 2025
• Among the benefits will be a $2,000 cap in drug costs and a way to stretch costs over 12 months
• There are more changes coming; 10 of the most common drugs will be cheaper then

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More than 1.9 million Michigan seniors may get a big break on drug costs in 2025.

The changes are the result of the 2022 Inflation Reduction Act, a wide-sweeping package that also aims to shift the country’s reliance from fossil fuels to cleaner energy sources. The law also took a major swing at drug costs for millions of older Americans.

Beginning in 2025:

• Out-of-pocket drug costs on medications generally taken at home — rather than infusion drugs given at a clinic, for example — will be capped at $2,000 per year — down from $8,000 for many beneficiaries.
• Patients can arrange a payment plan that will allow them to spread their out-of-pocket costs out over 12 months to avoid hitting the cap early in the year. Those who opt for a payment plan will get a bill from their insurer, instead of paying the pharmacy.

The changes apply only to those enrolled in standalone Medicare Part D plans or who have drug coverage through Medicare Advantage plans — about 1.9 million Michiganders.

The cap does not cover certain infusion drugs that are covered by Medicare’s Part B program, including some cancer drugs like Keytruda, said Mark Stiglitz, Chief Medicare Officer for the Great Lakes region of the insurer Aetna, part of CVS Health Co.

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That’s no small exception. Keytruda is used to treat 17 different types of cancer, according to its website. 

Additionally, the drugs must be covered by the insurer.

Complicating matters, plans vary on cost sharing — meaning many Medicare beneficiaries will pay much less than the cap, said Kyle Ingraham, who manages Medicare plans at Detroit-based insurer HAP, which provides Medicare coverage to about 80,000 Michiganders.

“It's dangerous to tell somebody ‘This is what your out-of-pocket cost is going to be,” he said. “With the new law and the Inflation Reduction Act, it can be up to $2,000, but in some situations, we actually see it being less than that — depending on the plan and the medications that you're on.”

Stiglitz at Aetna, which covers about 182,000 Michiganders, agreed: 

For more common drugs, “it will be a rare member that will actually pay $2,000 for their Part D drugs,” he told Bridge. “The vast majority won't even come close.”

All of this will be some “sense of relief” for countless seniors, said Tricia Neuman, senior vice resident and executive director of the Medicare policy program at KFF, a San Francisco-based health care research nonprofit. 

While most older adults say they are able to afford the medications they need, that is less so the case with individuals who need multiple prescriptions, according to a 2023 poll by KFF. About 3 in 10 respondents reported skipping or otherwise not taking their drugs as directed because of the costs.

“Now, $2,000 for some people is still a lot of money, but it is substantially less than what many people were paying before the cap was put into effect,” Neuman said.

The Inflation Reduction Act already had capped covered insulin costs in Part D prescription drug plans at $35 a month — a benefit affecting about 122,000 Michigan Medicare beneficiaries, according to White House estimates. The law also eliminated out-of-pocket costs for vaccines recommended by the US Centers for Disease Control and Prevention, and it requires drug companies who increase drug prices faster than inflation to pay a rebate to Medicare — a penalty that the Biden administration argued curbs the increases in out-of-pocket consumer costs.

Upcoming in 2026 will be lower costs for 10 of Medicare’s most expensive drugs — the result of negotiations that were made possible under the 2022 law.