4 big changes that every participant should know

Big changes are coming to Medicare in 2025, and they could significantly change your prescription drug costs.

Thanks to the Inflation Reduction Act, Medicare beneficiaries will see the most significant updates to the program’s drug coverage since it was introduced in 2006.

These updates are a big win for many beneficiaries, especially those on expensive medications, but there are some important details and potential costs to keep in mind.

4 Big Changes to Medicare for 2025

Medicare Open Enrollment runs from October 15th to December 7th. During this annual event, people with Medicare can review plans and make changes to their Medicare coverage that take effect on January 1.

If you’re one of the more than 66 million people enrolled in Medicare, it’s important to understand upcoming changes to the program so you can make informed decisions.

As Medicare Open Enrollment continues, here’s everything you need to know.

1. The annual out-of-pocket drug limit is $2,000

The Inflation Reduction Act, signed into law in 2022, greenlighted major changes to Medicare. These measures are being rolled out over time, with the latest provision coming into effect next year.

Starting in 2025, out-of-pocket drug costs will be capped at $2,000 per year, and prescription drugs will be phased out.

Here’s how the new system will work:

You pay a deductible of $590 (up from $545 in 2024). When you reach your deductible, you pay 25 percent of the cost of the drug in the initial coverage phase up to out-of-pocket expenses reaches 2000 dollars. When you reach this limit, you’ll get what’s called catastrophic coverage and pay no additional out-of-pocket costs for prescription drugs.

The provision is expected to save Medicare enrollees about $7.4 billion annually, according to the Centers for Medicare and Medicaid Services (CMS). That translates to an average savings of nearly $400 per person for more than 18.7 million beneficiaries in 2025, or about 36 percent of the total Part D enrollees.

2. Some Part D plan premiums may go up, but the average cost is going down

While some Medicare beneficiaries will save money on health care with the new $2,000 limit, especially for those on expensive brand-name drugs, others may see their premiums rise.

Before we get into the details, here’s a quick overview of how Medicare members get their prescription drug coverage.

The Part D marketplace has two types of plans, both of which are administered by private health insurance companies that contract with the federal government and receive funding from CMS. One is a stand-alone plan that only offers drug coverage, and the other is Medicare Advantage plans that combine drug coverage with other health care services.

KFF, a nonpartisan health policy research organization, warns that some plans may adjust their premiums, formularies, copays or deductibles in response to the new $2,000 out-of-pocket spending limit. This is partly due to increased costs for insurers and limited increases in government payments.

A new program, the Part D Premium Stabilization Demonstration, helps limit premium increases for Part D enrollees. This program limits monthly premium increases to $35 in 2024 and 2025.

Therefore, at most, individual drug plan premiums could increase by $35 per month compared to 2024 levels. But some plans may have more modest increases or even decreases.

With that in mind, the average Part D premium is going down, according to CMS. In 2025, the average premium for Part D beneficiaries is expected to decrease by $7.45 to $46.50 in 2025 from $53.95 in 2024.

While it’s helpful to understand the average cost of a drug plan, you’ll need to look at your specific plan’s premium — or any plans you plan to switch to during open enrollment — to understand the true cost.

3. You can pay your drug costs over time

Starting in 2025, Medicare prescription plans must offer members the option to spread the cost of prescription drugs into monthly payments over the course of a year, instead of paying them all at once at the pharmacy.

If you choose to participate in the Medicare Prescription Payment Plan, you will receive a bill from your Medicare Advantage or stand-alone Part D plan for drug costs instead of paying at the pharmacy. Participation in the program does not require additional payment.

To enroll or learn more, contact your Medicare prescription plan provider.

4. Potentially higher Medicare Part B premiums and deductibles

Your Medicare Part B premium and deductible change each year. In 2025, it is likely to increase, although the change has not yet been announced. Medicare Part B covers a wide range of outpatient services, including doctor visits, outpatient surgeries, and medical equipment.

Medicare Part B premiums and deductibles are important information for beneficiaries. All Medicare members pay these costs regardless of whether they are in a Medicare Advantage or Original Medicare plan.

Most participants have a Part B premium is automatically deducted from their monthly Social Security check. However, it should be noted that state cost-savings programs, as well as programs within Medicare Advantage plans, can help reduce or eliminate the Part B premium for low-income beneficiaries.

What to do during Medicare Open Enrollment

Open Enrollment for Medicare takes place every year from October 15th to December 7th. During this time, you can switch from Original Medicare to a Medicare Advantage plan (or vice versa), switch between Medicare Advantage plans, or Medicare Part D prescription drug plans.

You can view the plans using Search for Medicare plans and sign up for a new plan online or by phone.

Consider factors other than monthly premiums when estimating Medicare costs. Deductibles, co-payments and access to services all contribute to the total cost. Choosing the lowest premium plan may not always be the best option. Lower premiums may mean higher out-of-pocket costs or limited drug coverage.

If you are struggling to pay for Medicare, you may be eligible for the Supplemental Assistance Program. Those who are eligible typically pay up to $4.50 for a generic drug and $11.20 for a brand-name drug with extra help.

If you are enrolled in a Medicare plan, you should have received your annual change notice letter in the mail in September.

Please review this letter carefully. It will describe changes to the cost of your current plan, as well as a list of medications, also known as a formulary. Make sure your current medications are still covered and see if their levels or your out-of-pocket costs have changed.

Get help from SHIP

Navigating Medicare can be difficult. If you need help researching your options, a network of free, federally funded programs can help.

The State Health Insurance Program (SHIP) provides individualized counseling, education, and support to Medicare beneficiaries and their families.

Each state has its own SHIP program, although it may have a slightly different name in your state, such as SHINE (Serving Health Insurance Needs of Everyone) in Florida or SHIBA (Senior Health Insurance Benefits Advisors) in Idaho.

A SHIP consultant can help you with many things, including comparing treatment plans, identifying potential savings, and answering open enrollment questions — all for free.

You can find your SHIP online SHIP regional locator tool. Or you can call the national network hotline at 877-839-2675.

Result

The 2025 Medicare changes could significantly change your drug costs and how payments are managed. During open enrollment, take the time to compare plans, confirm your medications are covered, and learn about options like the Extra Help program to keep costs down.

Whether you are a current Medicare member or approaching fitnessit’s time to understand how these upgrades will affect your budget and how you can make them work for you.