Don’t Miss These Three Important Changes for Medicare in 2025
Big changes are on the horizon for Medicare Part D drug plans thanks to the Inflation Reduction Act of 2022. One provision you may be familiar with already went into effect in 2023: the $35 cap on the price of Part D covered insulin. Three more changes for Medicare plans with prescription drug coverage go into effect on January 1, 2025:1
- Maximum annual out-of-pocket costs capped at $2,000 for prescription drugs. In 2025, Part D plans can have an annual deductible up to $590 (up from the maximum of $545 in 2024). The $2,000 cap includes deductibles, copayments, and coinsurance amounts you pay for covered drugs. It doesn’t apply to premiums or to drugs a plan doesn’t cover.
- Elimination of the “donut hole” coverage gap phase, which occurs when you and your drug plan reach $5,030 spent on covered medications in 2024, known as the “donut hole.” Originally, after reaching a specified limit in drug costs, beneficiaries would enter this gap and have to cover a large percentage of their medication costs until they reached another spending threshold, called "catastrophic coverage," where Medicare would cover most of their remaining drug expenses for the year. Elimination of this coverage gap in 2025 will simplify how Part D drug plans work.
- Ability to spread payments for out-of-pocket costs for prescription drugs throughout the calendar year. The Medicare Prescription Payment Plan will let enrollees opt to pay their prescription costs monthly rather than all at once.
These changes, which are intended to lower out-of-pocket costs for Part D enrollees, could also make it harder for some Part D plan sponsors to offer low-priced coverage, particularly sponsors of stand-alone prescription drug plans (PDPs). Standalone PDPs differ from Medicare Advantage plans, (also called Part C), which are Medicare-approved “bundled” plans which include Medicare Part A (hospitalization), Part B (outpatient), and usually Part D (prescription drug coverage). While the Inflation Reduction Act includes a 6% cap on base Part D premiums, the cap does not apply to the total premium that individual plans may charge you. So enrollees may see a wide variance in premiums, copayments, and covered drugs across different plans.2 If you already have Part D coverage, be sure to review the annual notice of change notification your plan sent in September that outlines changes to your plan for 2025.
The Medicare Annual Enrollment Period (AEP), which runs from October 15 to December 7, presents an opportunity for new and existing enrollees to compare plans, prices, and coverage for the upcoming year. If you have a Medicare Advantage plan, you have another opportunity to make changes during the Medicare Advantage open enrollment period, which runs from January 1 – March 31. However, you must already be enrolled in a Medicare Advantage plan to do so.
1)Lankford, Kimberly, “7 Medicare Changes You’ll See in 2025.” AARP.org, 26 AUG 2024, https://www.aarp.org/health/medicare-insurance/info-2024/medicare-changes-coming-in-2025.html.
2)“CMS Releases 2025 Medicare Part D Bid Information and Announces Premium Stabilization Demonstration.” CMS.gov, https://www.cms.gov/newsroom/fact-sheets/cms-releases-2025-medicare-part-d-bid-information-and-announces-premium-stabilization-demonstration.