Health policy analysts have raised concerns regarding the financial sustainability of Medicare's prescription drug program following a report from congressional advisers. The report indicates that more than one in five Medicare Part D enrollees hit the program's $2,000 out-of-pocket drug cap in 2025.
The findings highlight the challenges facing the redesigned Medicare drug program, which was established under the Inflation Reduction Act. This legislation limits the amount seniors pay for outpatient prescription drugs and shifts costs beyond the cap to taxpayers, insurers, and drug manufacturers. According to the report, 66% of total Part D drug spending occurred in the catastrophic phase in 2025.
Spending on specific drug classes has accelerated. GLP-1 drug spending rose from $300 million in 2024 to $2 billion in 2025. Additionally, spending on cancer and diabetes treatments posted double-digit growth.
Medicare’s Hospital Insurance trust fund is projected to become insolvent in 2033. Furthermore, Part B spending is projected to grow 8.5% annually through 2030, while Part D spending is expected to grow 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.
Regarding the Inflation Reduction Act's drug price negotiation program, a federal court recently rejected Merck & Co., Inc.’s challenge to the program. This ruling allows the government to continue implementing negotiated prices for selected high-cost drugs.
