Medicare has undergone several major changes since it launched in 1965. And now, with the passage of the Inflation Reduction Act of 2022, it’s poised to change again, with several key provisions taking effect in 2025.
Many of the changes that are expected to come to Medicare, the federal health insurance program aimed at supporting adults age 65 and older (and some younger individuals with qualifying disabilities), will affect the prescription drug component known as Medicare Part D.
Medicare Part D is an optional part of original Medicare that covers prescription medications you take at home. It’s provided through private health plans that contract with the federal government to offer this coverage to beneficiaries. Many Medicare Advantage plans include a prescription drug component that is comparable to Medicare Part D.
While you don’t have to carry this type of insurance, many seniors do, as it provides affordable access to a wide range of medications you may need now or in the future. Here, we’ll unpack everything you need to know about how Medicare Part D has changed for 2025 and what to expect going forward.
[Note that this information was accurate at the time of publishing. It’s possible that the new Trump administration will change these policies, but it remains to be seen when and how.]
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What Are the Medicare Part D Changes in 2025?
It’s no secret that prescription medications can be very expensive.
“Prescription drug costs are one of the biggest concerns faced by Medicare beneficiaries, whether they get their drug coverage through a Part D plan or Medicare Advantage,” says Whitney Stidom, vice president of sales enablement with eHealth Inc., a health insurance broker and online resource provider headquartered in Santa Clara, California.
To address these concerns, several major changes have been made to Medicare Part D starting in 2025.
[READ: How Medicare Beneficiaries Can Save Money on Prescription Drugs]
A $2,000 annual out-of-pocket spending cap
A key change is the new $2,000 annual cap on out-of-pocket costs of prescription drugs. The Medicare Part D cap limits the amount you need to pay for prescription medications across the year.
“Once you’ve paid this out in the form of copayments, coinsurance or deductibles, you’ll have no out-of-pocket costs for covered prescription drugs for the rest of the year,” Stidom says.
This is a welcome change for many seniors and those with disabilities who depend on prescription medications and for whom copayments and coinsurance costs can really add up.
[7 Reasons to Switch Medicare Part D Plans]
Medicare prescription drug payment plan
Another new option for 2025 is to either pay for your medications in monthly installments or all at once upfront as part of the Medicare prescription payment plan, Stidom explains. This option gives certain beneficiaries more flexibility in timing their spending and managing their costs.
If you choose to use this optional program, in addition to making your monthly premium payment to Medicare, you’ll pay an additional fee directly to Medicare or your Medicare Advantage plan owner to cover the cost of the prescriptions you use. This means you won’t pay at the pharmacy when you pick up medications.
This free program doesn’t alter the cost of the medications, but it can make it easier to manage them and spread out their costs over the year in some cases. It may be a good option if you take a lot of expensive medications or if you anticipate rising prescription costs during the calendar year, as it can smooth out those cost spikes.
Lower prescription drug costs for beneficiaries
As part of the Inflation Reduction Act, Medicare has begun negotiating directly with pharmaceutical manufacturers to lower drug prices for a range of widely used prescription medications. This negotiation program is slated to continue over the next several years, with 10 to 20 formulas getting added to the list of reduced-cost medications each year.
The first 10 drugs that have been negotiated include:
— Eliquis
— Enbrel
— Entresto
— Farxiga
— Fiasp, Fiasp FlexTouch, Fiasp PenFill, NovoLog, NovoLog FlexPen, NovoLog PenFill
— Imbruvica
— Januvia
— Jardiance
— Stelara
— Xarelto
Another 15 drugs are being negotiated and are expected to have lower prices effective in 2027:
— Austedo, Austedo XR
— Breo Ellipta
— Calquence
— Ibrance
— Janumet, Janumet XR
— Linzess
— Ofev
— Otezla
— Ozempic, Rybelsus, Wegovy
— Pomalyst
— Tradjenta
— Trelegy Ellipta
— Vraylar
— Xifaxan
— Xtandi
The program is designed to continue, adding lower prices for more and more medications. For example, in 2026, 15 Part B and Part D drugs will be added to the list with new prices effective in 2028. In 2027, another 20 Part B and Part D drugs will be added to the program for 2029. And beginning in 2028, 20 Part B and Part D drugs will be added every year thereafter. Expect a two-year lag between when a medication is listed for negotiation and when the new price becomes effective.
Elimination of the Medicare Part D coverage gap (donut hole)
In years past, Medicare beneficiaries had to navigate the so-called donut hole, which was a coverage gap in Medicare Part D because of its phased nature of coverage.
It used to be that when your drug costs exceeded your individual coverage period threshold, you’d then be responsible for 100% of your prescription costs until those costs met the threshold for the catastrophic coverage period. Sometimes that gap could reach thousands of dollars. And then, once you got to the catastrophic phase, you were still responsible for 5% of the cost of each drug. This could get very expensive for some beneficiaries.
The good news: The donut hole has been closed. Now, when you hit the $2,000 out-of-pocket limit, you immediately enter the catastrophic coverage phase, where you owe nothing for covered medications for the rest of the year. Closing this gap is a significant help for many beneficiaries who need expensive prescriptions.
Expanded access to insulin at lower costs
Insulin prices have now been capped at $35 per month, with no more deductible requirement for Part D–covered insulin. If you get your insulin in three-month increments, your cost can’t exceed $105 each time.
In addition, if you use an insulin pump that’s covered under Part B’s durable medical equipment benefit or you get your covered insulin through a Medicare Advantage plan, your cost can’t exceed $35 per month. The Part B deductible for durable medical equipment doesn’t apply for insulin.
Expanded family caregiver options
A respite care program is set to expand in 2025, which will help patients with dementia and their caregivers. Called Guiding an Improved Dementia Experience (GUIDE), this program provides a 24/7 hotline for caregivers to locate medical services and community-based assistance. The program also includes caregiver training and up to $2,500 per year for at-home, overnight or adult day care respite services.
Launched in July 2024, GUIDE used to encompass 96 organizations across the U.S. Starting in July 2025, the number of organizations involved will grow to nearly 400.
To qualify for this program, participants must be enrolled in original Medicare and have a dementia diagnosis. Those who are in hospice or a nursing home aren’t eligible.
Increased access to preventive medications
The Inflation Reduction Act also included provisions to improve access to preventive care, including expanded vaccine coverage. Beneficiaries now pay nothing out of pocket for an expanded range of vaccines thanks to changes to both Part B and Part D of Medicare. The following vaccines are now available to beneficiaries cost-free:
— COVID-19
— Pneumococcal pneumonia
— Shingles
Improved pricing transparency
To help control costs, Medicare can now negotiate directly with manufacturers over the set price of medications. A new rule also compels drug companies to pay Medicare a rebate
if prices rise faster than inflation. This is intended to discourage price hikes that could negatively impact beneficiaries.
Patient assistance programs
The Extra Help program, a joint program of Medicare and Social Security, has also been expanded. This program helps low-income individuals (people who earn less than 150% of the federal poverty level) afford their prescription medications.
If you qualify for Extra Help, you’ll usually pay no more than $4.50 for each generic drug and $11.20 for each brand-name drug you use.
Many states also offer help in paying your drug plan premiums and covering the cost of prescriptions and other drug costs via State Pharmaceutical Assistance Programs. These programs are operated by the individual states, and not all states have them. You can search for your state on Medicare’s webpage to find out what’s available in your area.
Impact on drug plan premiums
While the aim of the various changes made to Medicare Part D related to the Inflation Reduction Act was to lower costs to beneficiaries, it’s possible that your individual Medicare Part D plan will have a higher premium cost in 2025 and beyond. However, there is also a provision that limits the base beneficiary premium used to calculate individual plan premiums to no more than 6% per year through 2029.
Part D changes for high-cost drugs and specialty drugs
Medicare Part D plans encourage beneficiaries to use generic or lower-cost options, but in some cases, a high-cost specialty drug is the only option. In those cases, the $2,000 out-of-pocket cap is the primary way Medicare can limit the impact of these high-priced drugs on individual beneficiaries.
Enrollment and Plan Options in 2025
Each year, during Medicare’s open enrollment season (October 15 to December 7), you get a chance to review your plan selections and make changes.
It’s important to take advantage of this opportunity because “Part D prescription drug plans and Medicare Advantage plans can change their pricing and benefits from year to year,” explains Meagan Dow, senior strategist with the client needs research team at Edward Jones, a financial services firm headquartered in St. Louis.
The open enrollment period is your chance “to make sure your coverage still works for you and to comparison-shop to see if there’s a better option,” she says, adding that all of the recent changes that have come into play in 2025 mean this annual task is even more important going forward.
You can review and compare Medicare Part D plans using U.S. News’ ranking of Best Medicare Part D Companies. Consult U.S. News’ state-by-state ranking of Best Medicare Advantage plans if you want to go that route.
To determine which plan is best for you, review all the medications you use regularly and consider whether you’re likely to need additional medications in the coming year. Then, check the formulary (list of drugs that are covered) for various plans you’re considering to determine whether the meds you use are included and, if so, how much your out-of-pocket costs might be. While the new $2,000 cap has helped lower costs significantly, it’s still a lot of money, so see if there are other ways to lower your expenditures.
Easing the Transition to 2025
If you haven’t already, review your plan options for 2025 and make sure you understand what’s new this year versus last year. This can help you avoid any nasty surprises when you head to the pharmacy to fill a prescription.
Keep in mind that each Medicare Part D plan and Medicare Advantage plan that includes prescription drug coverage has its own formulary. And because of the changes that have come with the Inflation Reduction Act, your plan’s formulary may have changed this year.
This could mean some medications that were free for you before now require a copayment or the amount of that copayment may have changed.
If you’re enrolled in a Medicare Advantage plan, also keep an eye out for a mid-year statement. This will show any benefits you haven’t yet used, such as dental, vision or fitness coverage. This statement is intended to help you get the most out of your plan before the year is up.
If you have questions about your benefits, contact your plan administrator.
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How Medicare Part D Has Changed for 2025 originally appeared on usnews.com