Medicare Savings from Generics: How Part D Coverage and Copays Cut Costs in 2026

For millions of Medicare beneficiaries, the cost of daily medications used to be a hidden tax on retirement. A blood pressure pill, a cholesterol medicine, or a diabetes drug-each one adding up until out-of-pocket spending hit thousands. But in 2025, everything changed. Thanks to the Medicare Part D reforms under the Inflation Reduction Act, the system now actively shields people from runaway drug costs, especially when they use generic drugs.

How Much You Save with Generics in 2025

Before 2025, if you took a few generic medications every month, you could easily spend $7,000 to $8,000 a year before hitting catastrophic coverage. Now, the cap is $2,000. That’s a 75% drop in what you might pay out of your own pocket. For someone on three or four common generics, this often means paying less than $100 a month instead of $300 or more.

The math is simple: once you hit $2,000 in true out-of-pocket spending (TrOOP), you enter catastrophic coverage. From that point on, you pay $0 for generics for the rest of the year. No more surprises. No more bills. Just your pills, free.

According to the Centers for Medicare & Medicaid Services (CMS), this change alone will save Medicare beneficiaries a collective $7.4 billion in 2025. That’s not a guess-it’s based on real data from plan bids and enrollment numbers. About 11 million people will save an average of $400 a year just by switching to generics and staying under the cap.

What You Actually Pay: Copays and Coinsurance

Here’s how it breaks down in 2025:

• Deductible: Up to $590 (same as 2024). Not all plans have one-some waive it entirely.
• Initial Coverage: After the deductible, you pay 25% of the drug’s cost. For generics, that often means $10 or less for a 30-day supply.
• Catastrophic Coverage: Once you hit $2,000 in out-of-pocket spending, you pay $0 for generics.

Median copays for preferred generics are consistently around $10 across both standalone Prescription Drug Plans (PDPs) and Medicare Advantage Prescription Drug plans (MA-PDs). That’s the same whether you’re with UnitedHealthcare, Humana, or a smaller local insurer.

But here’s the catch: you don’t pay premiums toward that $2,000 cap. Only what you pay at the pharmacy counts. So if your plan charges $40 a month for premiums, that doesn’t help you reach the cap. Only your copays, coinsurance, and deductible payments do.

PDP vs. MA-PD: Which Saves More?

There are two main ways to get Part D coverage: standalone drug plans (PDPs) or Medicare Advantage plans with drug coverage (MA-PDs).

On the surface, they look similar. But the numbers tell a different story.

MA-PDs have an average monthly drug premium of just $7. PDPs? Around $39. That’s nearly six times more. For someone taking two generics a month, that’s over $380 extra a year just in premiums.

And while both types of plans charge similar copays for generics, MA-PDs often bundle drug coverage with other benefits-like dental, vision, or fitness memberships. That means you’re getting more value for less money.

Still, PDPs are popular. Why? Because they let you keep your original Medicare and choose any doctor. But if you’re looking to save, MA-PDs win-especially if you’re on mostly generics.

Who Gets the Best Deal? Low-Income Beneficiaries

If your income is below a certain level, you may qualify for Extra Help (also called Low-Income Subsidy or LIS). This program is a game-changer.

• Deductible: $0
• Generic copay: $0 to $4.50
• No coverage gap

That means someone on LIS could pay $3.50 for their generic statin, $2 for their metformin, and never pay more than $10 a month-even if they take five different generics. And they never have to worry about hitting a $2,000 cap because they’re already in catastrophic coverage from day one.

Only about 30% of eligible people enroll in Extra Help. If you’re on a fixed income and take generics, you should check your eligibility. It’s free to apply through Social Security.

Why Some People Still Struggle

Not everyone is enjoying the savings. A 2024 survey by the Medicare Rights Center found that 23% more people called their helpline about generic drug changes than the year before.

Here’s why:

• Therapeutic substitution: Your plan might switch your generic from one manufacturer to another-even if they’re the same drug. Sometimes the new version has a higher copay.
• Step therapy: You might have to try a cheaper generic first, even if your doctor says you need a different one.
• Formulary changes: Plans can drop a generic from their list mid-year. You’ll get a notice, but it’s too late if you’re already on it.

Also, many people don’t realize that manufacturer discounts count toward the $2,000 cap. That’s a big deal. If your drug has a discount (like from a rebate), that money counts as if you paid it. So even if you pay $5 at the pharmacy, $15 of the drug’s cost might be counted toward your cap. That helps you hit the $2,000 limit faster.

But 41% of beneficiaries still don’t understand how this works. They think they’re paying more than they are. And that confusion leads to stress-and sometimes, skipping doses.

What You Need to Do Now

You don’t have to wait for next year. The changes are active now. Here’s what to do:

1. Check your plan’s formulary: Use the Medicare Plan Finder tool. Search for your exact generic drugs. See which plans cover them at $0 or $5.
2. Compare premiums and copays: A plan with a $30 premium might have $2 copays. Another with a $10 premium might have $15 copays. Total cost matters more than just the premium.
3. Ask about prior authorization: Some plans still require extra steps for generics. Call your plan and ask: “Do I need approval for my current generic?”
4. Apply for Extra Help: If you’re on a fixed income, even if you think you make too much, apply. The rules are broader than most people think.

And if you’re switching plans during Open Enrollment (October 15 to December 7), make sure your new plan covers your drugs at the same or lower cost. Don’t assume it will.

The Bigger Picture: Generics Are Saving Medicare

Generics make up 84% of all Part D prescriptions but only 27% of total spending. That’s the power of generics. They’re not just cheaper-they’re the backbone of cost control.

The Inflation Reduction Act didn’t just cap out-of-pocket spending. It also forced drugmakers to pay rebates if they raise prices faster than inflation. That’s hitting brand-name drugs hardest-but it helps generics stay affordable.

By 2028, generic use in Part D is expected to climb to 87%. That’s because the system is now designed to reward people for choosing them. And as biosimilars (generic versions of biologic drugs) roll out, we’ll see even more savings.

The goal isn’t just to cut costs-it’s to make sure people take their meds. Because when someone skips a pill because it’s too expensive, it leads to hospital visits, ER trips, and higher costs for everyone. The new Part D rules are finally aligning incentives: save money, stay healthy, and keep the system running.

What’s Coming Next

The Selected Drug Subsidy Program starts in 2026. It will give plans a 10% subsidy to lower costs for certain high-cost generics. That could mean even lower copays for drugs like insulin analogs or complex heart medications.

CMS is also tightening rules around formulary changes. Plans will now have to give longer notice before dropping a drug. And there’s talk of making the $2,000 cap permanent-not just for 2025, but forever.

For now, the message is clear: if you’re on generics, you’re in the best position to save. The system is built to help you. You just need to know how it works.