As we approach 2025, notable changes to Medicare are on the horizon, largely influenced by the 2022 Inflation Reduction Act (IRA). These adjustments will notably impact Medicare Part D, which covers prescription drugs, as well as other aspects of Medicare. The Centers for Medicare & Medicaid Services (CMS) have provided an early look at what beneficiaries can expect, and the changes aim to make healthcare more accessible and affordable for millions of Americans.
Medicare Part D: major changes for 2025
Medicare Part D, which helps cover the cost of prescription drugs, is set to undergo several significant changes in 2025, thanks to provisions in the Inflation Reduction Act. These changes are designed to reduce out-of-pocket expenses for beneficiaries and simplify the process of managing prescription drug costs.
1. Base premium increase
According to the CMS, the base beneficiary premium for Medicare Part D will see a modest increase in 2025. The premium will rise by $2.08, or approximately 6%, moving from $34.70 to $36.78. While this increase might seem small, it’s essential to note that the Inflation Reduction Act includes a 6% cap on base Part D plans. However, actual premiums can vary depending on the specific plan and coverage chosen by the beneficiary. The CMS is expected to release preliminary averages for Part D premiums later this summer, providing more detailed information on what enrollees can expect.
2. Introduction of a $2,000 Out-of-Pocket Maximum
One of the most significant changes coming to Medicare Part D in 2025 is the introduction of a $2,000 out-of-pocket maximum for prescription medications. This cap is expected to be a game-changer for beneficiaries, particularly those who require expensive medications regularly. Under the new rule, once a beneficiary’s out-of-pocket expenses reach $2,000 in a year, the plan will cover 100% of the remaining drug costs for the year. This change will provide substantial relief to individuals who struggle with high prescription drug costs, ensuring they do not face unlimited out-of-pocket expenses.
It’s important to note that this $2,000 maximum applies only to medications covered under Medicare Part D. Medications covered under Medicare Part B, typically administered in a clinical setting, do not count toward this cap.
3. Elimination of the coverage gap (Donut Hole)
The coverage gap, commonly known as the “donut hole,” has long been a source of confusion and financial strain for Medicare Part D enrollees. This gap is a temporary limit on what the drug plan will cover for drug costs after a certain threshold is reached. However, starting in 2025, the coverage gap will be eliminated entirely.
In previous years, Medicare Part D included four stages of coverage: the deductible phase, the initial coverage phase, the coverage gap (donut hole), and the catastrophic coverage phase. With the elimination of the donut hole, beneficiaries will experience a more straightforward payment structure. After paying the deductible (up to $590 in 2025), they will make copayments until they reach the $2,000 out-of-pocket maximum, after which catastrophic coverage will kick in, covering all additional costs.
4. New payment plan options for medications
Starting in 2025, Medicare Part D will introduce a new payment plan option that allows beneficiaries to spread out their prescription drug costs over the year. This change is particularly beneficial for individuals who face high upfront costs for their medications. The payment plan is opt-in, meaning beneficiaries will have the choice to enroll and manage their drug costs more effectively by paying in installments throughout the year.
What about Medicare Part A and Part B?
While the most significant changes in 2025 pertain to Medicare Part D, beneficiaries should also be aware of potential adjustments to Medicare Part A and Part B, although these details are still pending.
1. Medicare Part A
Medicare Part A primarily covers inpatient care, including hospital stays, skilled nursing facility care, hospice care, and some home health care. Nearly 99% of Medicare beneficiaries receive Part A without a premium because they paid Medicare taxes while working. The CMS typically announces changes to Medicare Part A premiums, deductibles, and co-insurance rates in the fall. Last year, the CMS announced the 2024 changes to Part A on October 12, 2023, so we can expect similar timing for 2025 announcements.
2. Medicare Part B
Medicare Part B covers outpatient care, including doctor visits, preventive services, and certain medical equipment. It is optional and requires a monthly premium. For 2024, the Part B premium was set at $174.70 per month. As with Part A, the CMS will announce any changes to Part B for 2025 in the fall, likely around October. Beneficiaries should stay informed about these updates, as changes in premiums or deductibles can impact their healthcare costs.
Medicare Part C: Enhanced Notifications for 2025
Medicare Advantage, also known as Medicare Part C, is another area where beneficiaries will see changes in 2025. Part C plans are offered by private companies and often include additional coverage, such as vision, dental, and hearing services, that Original Medicare does not cover.
Mid-year notifications for unused benefits
Starting in 2025, Medicare Advantage enrollees will receive a mid-year notification that reminds them of any unused benefits. This change is designed to help beneficiaries maximize the value of their plans by taking full advantage of the services and coverage options available to them. Additionally, this notification will prompt beneficiaries to reassess their plan choices during the annual enrollment period, ensuring they are enrolled in a plan that best meets their needs.
