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Some Medicare beneficiaries could save $900 on prescription drug costs in 2027 under new federal rules to help reduce payments for certain medications administered in hospitals.
The Centers for Medicare and Medicaid Services (CMS) announced Wednesday that the projected saving would apply to those covered by Original Medicare who receive qualifying medications in hospital outpatient departments. The changes are designed to lower out-of-pocket expenses for patients as well as reduce the amount Medicare pays for certain drugs.
The CMS estimates the change will reduce patients' combined costs by $1.1 billion and trim Medicare spending by $4.35 billion over next year.
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Original Medicare is the federal government's health insurance program for those aged 65 and over, as well as Americans with disabilities or long term health conditions.
The rule is part of a broader overhaul of payments for hospital outpatient services, including care, tests or surgeries that do not require staying in a hospital or clinic overnight.
Americans continue to face substantial healthcare costs. Medicare Part B generally covers certain medications administered by health workers, such as chemotherapy infusions or injectable biologics. Patients typically pay 20 percent of the cost after meeting their deductible. In 2026, that stands at $283, while the standard monthly premium is $202.90.
Federal and personal spending on drugs covered by Part B has risen substantially in recent years. The Medicare Payment Advisory Commission found that Medicare and beneficiaries spent a combined $23.9 billion on Part B drugs administered in hospital outpatient departments in 2024, up from $21.1 billion in 2023. That includes government payments and patients' cost-sharing, rather than only what beneficiaries personally paid.
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What Is Changing?
The new rules will make changes to the 340B Drug Pricing Program. This allows eligible hospitals and other healthcare providers to purchase outpatient medication from manufacturers at discounted prices. Medicare will reimburse qualifying hospitals for drugs purchased through the program at 28 percent below medications' average sale price, instead of the previous six percent rate.
According to the CMS's final rule, a survey conducted between January and April 2026 found "significant disparities" between hospitals' acquisition costs for discounted medication and how much Medicare paid for them. In some instances, the agency found that a patient's required contribution toward a drug exceeded the price the hospital had originally paid to purchase it.
The CMS said the new rule will help pass those discounts on to patients and taxpayers, with a projected average saving of $900 for patients in 2027.
"CMS is committed to spending taxpayer funds wisely and efficiently, so America's seniors can continue getting the care they need," CMS Administrator Dr. Mehmet Oz said in a statement. "By right-sizing payments and rooting out waste, today’s reforms will drive affordability in Medicare for current beneficiaries while ensuring it will still be there to serve their children and grandchildren."
The new rules also aim to reduce costs of imaging services, such as X-rays, MRI and CT scans, ultrasounds and bone density tests that are performed at off-campus hospital outpatient departments. The CMS will apply lower payment rates comparable to those used in physician offices, a change it estimates will save beneficiaries and taxpayers some $260 million in 2027.
The agency is also removing 637 additional services from Medicare's inpatient-only procedure list, which means more treatments can be performed in an outpatient setting.
Criticism
The American Hospital Association (AHA) has criticized the changes, with its Senior Vice President of Public Policy Analysis and Development Ashley Thompson warning that reduced reimbursements could put financial pressure on hospitals serving rural and low-income communities.
She said AHA remains concerned that the reductions in 340B reimbursement would "further stress hospitals' ability to care for their patients."
Contact Newsweek editors on this story: John Fitzpatrick and James Debens
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