Between 2023 and 2025, the Medicare Part D market has experienced several meaningful changes, each of which has influenced patient cost sharing:

• High drug trends, driven by the rise of GLP-1s and specialty medications influencing the drug mix in Part D
• Legislative and regulatory changes, through the Inflation Reduction Act (IRA) and pharmacy point-of-sale direct and indirect remuneration (POS DIR) requirements
• Evolving payer actions, including benefit design and formulary structure changes

This white paper examines trends in actual out-of-pocket (OOP) costs among Medicare Part D beneficiaries from 2023 through early 2025, to understand the net impact of the key forces outlined above. Our analysis summarizes the proportion of beneficiaries reaching the catastrophic coverage phase each year,¹ their associated OOP costs, and the timing of these events. We also examine 2024 utilization patterns following the elimination of catastrophic cost sharing and 2025 patterns following the Part D benefit redesign.

Unless explicitly stated, OOP costs refer exclusively to Part D drug cost sharing and do not include member premium costs.

Key findings

Average OOP spending among all non-low-income (NLI) beneficiaries decreased from $250 in the first six months of 2023 to $230 in the first six months of 2025. This represents a decrease in member OOP costs from nearly 14% of gross costs to 10% of gross costs.

Among NLI beneficiaries’ costs in the first half of the year, average OOP spending on Part D cost sharing decreased 8% between 2023 and 2025 on a dollar basis, which is particularly notable given Part D gross costs for the NLI population increased 26% over the same time frame. While average OOP spending on Part D cost sharing for low-income (LI) beneficiaries decreased 20% in the same time frame, as seen in Figure 1, the absolute dollar reduction in NLI OOP costs is more pronounced than that of the LI population due to “extra help” via low-income cost-sharing subsidies (LICS) available to these beneficiaries.

• 2023 to 2024: The primary driver of the reduction is the elimination of cost sharing in the catastrophic coverage phase beginning in 2024, after members accumulated $8,000 to the TrOOP.² For LI beneficiaries, there was also an IRA change to limit cost sharing for non-Medicaid dually eligibles to nominal copays, consistent with dually eligible beneficiaries, which likely drives the $5 decrease.
• 2024 to 2025: As of June 2025, average OOP spending per member is similar to that of 2024 across both NLI and LI populations. This dynamic is driven by offsetting factors:
  • Higher-cost beneficiaries seeing OOP cost reductions, due to reaching the catastrophic phase more quickly.
  • Lower-cost beneficiaries paying more in OOP costs due to increases in deductibles, and changes from copays to coinsurance for brand drugs in 2025.

Nearly 8% of NLI beneficiaries reached the catastrophic phase by June 2025, which is five times higher than the proportion of NLI beneficiaries reaching the catastrophic phase by 1H in 2023 and 2024.

As shown in Figure 2 below, far more NLI beneficiaries are reaching the catastrophic phase in 2025 than in prior years. Similarly, among the LI population, 18.2% satisfied the catastrophic threshold as of June 2025, compared to less than 10% in 2023 and 2024. This is noteworthy because once a beneficiary reaches the catastrophic phase in 2025, consistent with 2024, they have no more cost sharing and therefore greater access to medications without financial barriers.

10% of all beneficiaries reached the catastrophic phase as of June 2025, compared to 3.5% by June 2023 and 2.9% by June 2024.

Members are reaching the catastrophic phase in 2025 at a faster rate than prior years due to a lower OOP spending threshold, increasing utilization trends, and plan benefit design changes. The 10% of beneficiaries that reached the catastrophic phase by June 2025 is approximately three times the percentage of beneficiaries that reached this phase by June 2023 and June 2024.

On average, NLI beneficiaries reaching the catastrophic phase by June 2025 spent only $955 OOP, driven by the CMS-established “greater of” logic in the Part D benefit design in 2025.

Figures 4A and 4B evaluate OOP spending for NLI beneficiaries through June of each year, stratified by those who reached the catastrophic phase versus those who did not. NLI members reaching the catastrophic phase by June 2025 spent approximately 60% less OOP than members reaching the catastrophic phase by June 2024, and 70% less than in 2023. Despite the 2025 MOOP of $2,000, beneficiaries are reaching the catastrophic phase with an average OOP that is over 50% less than $2,000 due to nuances with how the Centers for Medicare and Medicaid Services (CMS) implemented the IRA requirement that all basic Part D cost sharing, plus all benefit enhancements, accumulate to the MOOP, typically referred to as the “greater of” logic.³

Additionally, we found:

• NLI beneficiaries reaching the catastrophic phase spent 28% less OOP in 1H 2024 when compared to 1H 2023, driven by the IRA change to eliminate the 5% catastrophic cost sharing.
• Costs were similar between beneficiaries who did not reach the catastrophic phase between 1H 2023 and 1H 2024.
• The effective cost sharing (OOP cost as a proportion of total gross costs) through June decreased each year, from 13.6% in 2023 to 10.0% in 2025, on average. Figure 4B shows this broken out by cohort.
• For the cohort reaching the catastrophic phase, OOP costs decreased as a percentage of total gross costs between 1H 2023 and 1H 2025, from 7.2% to 4.5%.
• For the cohort not reaching the catastrophic phase, while the OOP costs on a dollar basis decreased from $205 to $175 between 1H 2023 and 1H 2025, OOP costs increased as a percentage of total gross costs from 17.2% to 22.7%.

After accounting for member premium changes, members reaching the catastrophic phase are still likely to pay far less in total OOP costs in 2025 than in 2023.

In response to the Part D benefit redesign, which included a large decrease in federal reinsurance, projected Part D plan costs (i.e., bid amounts) increased significantly between 2024 and 2025, where the national average monthly bid amount was $64.28 in 2024 and $179.45 in 2025. Despite large increases in plan costs, premium stabilization measures in the IRA as well as the additional Prescription Drug Plan (PDP) premium stabilization demonstration program curbed what otherwise would have been large-scale member premium increases. Part D premium increases are more pronounced on standalone PDPs, given these plans cannot “buy down” Part D costs with Part C rebate dollars as Medicare Advantage Prescription Drug (MAPD) plans can. Premium changes for 2025 were highly variable by plan and further influenced by member migration during the annual enrollment period. The LI population is relatively insulated from these significant changes due to premium and cost-sharing subsidies.

Combining these changes together, we see the following impacts on the NLI population, separated into three groups:

• High-cost drug utilizers: Cost-sharing savings likely far outweigh possible premium increases.
• Moderate drug utilizers (those that do not reach MOOP): Total savings are highly variable, where OOP costs may increase due to plan benefit design changes plus potential premium increases (particularly if enrolled in a standalone PDP) or total OOP costs may remain largely flat / decrease slightly if they saw a similar or lower premium.
• Low/non-utilizers: These individuals may face premium increases and not see offsetting cost-sharing savings from benefit redesign, driving higher total OOP costs.

Conclusion

As Medicare drug trends have steadily risen between 2023 and 2025 due to increased demand for medications such as GLP-1s and high-cost specialty medications, one might expect beneficiaries’ OOP costs to rise in parallel. However, these trends are accompanied by large-scale changes to the Part D benefit design, ultimately resulting in net decreases in average member OOP costs between 2023 and 2025. More beneficiaries than ever are reaching the catastrophic phase of the benefit and are paying far less than in prior years as a proportion of their total gross costs.

One key objective of the IRA—to reduce the OOP cost burden of Medicare beneficiaries—appears to be working, based on the emerging data. This may be working even more than anticipated, with patients paying approximately 50% less than the $2,000 MOOP before reaching the catastrophic phase, which is made possible by the “greater of” logic discussed above. However, underwriting risk for Part D plan sponsors is increasing materially, and further acceleration of strategies to offset plan costs and increase patient costs (e.g., increase deductibles, switch to coinsurance for brand drugs) may continue into 2026 and beyond.

Data & methodology

Data underlying this white paper was drawn from CMS’s 100% Research Identifiable Files (RIFs). We relied on RIF data through June 2025, including all members with at least one month of Part D eligibility in a given year. Total OOP costs exclude low-income cost-share subsidies or other amounts accumulating to TrOOP/MOOP, such as state-funded patient assistance programs (SPAPs) or the AIDS Drug Assistance Program (ADAP). Income status is assigned based on a beneficiary’s most common income status in each year, given this can change on a monthly basis.

Qualifications

Guidelines issued by the American Academy of Actuaries require actuaries to include their professional qualifications in all actuarial communications. Maddie Cline and Kevin Pierce are members of the American Academy of Actuaries and meet the qualification standards for rendering the actuarial opinions contained herein.

¹ We use the TrOOP/MOOP threshold in each year to determine the number of beneficiaries reaching the catastrophic phase. It is worth noting that these thresholds are not the same in each year, and importantly, the amount of total gross drug costs likely required to satisfy MOOP in 2025 is much lower than the amount required to satisfy TrOOP in 2023 or 2024.

² Of note, manufacturer Coverage Gap Discount Program payments counted toward the TrOOP limit, meaning many NLI beneficiaries paid much less than $8,000 in 2024 and still reached the catastrophic phase.

³ Under Part D redesign, actual member cost sharing plus any amounts paid for by supplemental benefits accumulate to the MOOP. For enhanced alternative plans, CMS has implemented this as actual cost sharing plus any amounts by which plan cost sharing is lower than cost sharing under the defined standard Part D cost sharing, resulting in the “greater of” the defined standard cost sharing and actual enhanced plan cost sharing to accumulate. For additional detail, refer to this white paper: https://www.milliman.com/en/insight/out-of-whose-pocket-inflation-reduction-act.