Open enrollment for Medicare is coming to an end, and while there is pressure to make a choice quickly, there are certain things to consider before making any significant changes to your current plan. There are four major changes to the way the program will operate in 2025, and determining them before the December 7 deadline will be critical.
These changes, which will affect more than 66 million Medicare members, are the result of the Inflation Reduction Act (IRA), which is being implemented gradually but steadily with the goal of providing beneficiaries with greater healthcare coverage.
$2,000 annual out-of-pocket drug cap
Historically, Medicare coverage used a “doughnut hole” approach, which has been removed by the IRA in favor of a $2,000 annual out-of-pocket medication spending cap.
Enrollees will incur a $590 deductible, up from $545 in 2024. After meeting the deductible, they will pay 25% of their prescription expenditures throughout the initial coverage period until their out-of-pocket expenses reach $2,000.
Beyond this threshold, catastrophic coverage kicks in, eliminating any extra out-of-pocket expenditures for prescription medications. The Centers for Medicare & Medicaid Services (CMS) estimate that this adjustment will save enrollees $7.4 billion per year, averaging about $400 per person for over 18.7 million beneficiaries, or around 36% of total Part D participation.
Some Part D plan premiums may increase — but the average cost is going down
Medicare Part D covers prescription drugs. It is always managed by a private insurance provider and can be “purchased” separately or in combination with a Part C or Medicare Advantage plan.
Many people’s premiums will rise due to the $2,000 cap, albeit for those who take pricey prescriptions, the increase will most likely be less than the cost of their medications. KFF, a nonpartisan health policy research organization, warns that many plans may modify their premiums, formularies, copays, or deductibles in reaction to the new $2,000 out-of-pocket expenditure cap.
Anticipating this eventuality, the government set a monthly rise maximum of $35 in 2024 and 2025.
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You can choose to pay your drug costs over time
Another notable change is that by 2025, Medicare prescription drug plans must have the option to distribute out-of-pocket prescription medication costs over the course of the year in monthly payments.
Previously, the cost had to be paid in advance or all at once at the pharmacy, which posed numerous issues for those taking a lot of medication, particularly at the start of the year before the hardship payments kicked in.
The new Medicare Prescription Payment Plan ensures that your drug expenditures are billed from your Advantage or standalone Part D plan rather than being paid at the pharmacy.
Higher Medicare Part B premium and deductible
Medicare Part B costs are changed annually. In 2025, the typical monthly premium will climb to $185, up 5.9% from $174.70 in 2024. Part B covers a variety of outpatient services, including doctor visits, outpatient surgery, and medical devices. The annual deductible will rise to $257, up 7.1% from $240 in 2024. Beneficiaries must achieve this deductible before Original Medicare begins to fund expenses.
Because every Medicare enrollee pays Part B premiums, understanding the increase and extent of out-of-pocket payments is critical, regardless of whether they are enrolled in a Medicare Advantage plan or simply Original Medicare.
Furthermore, because most Medicare members are also Social Security users, knowing how much will be withheld from their monthly checks will allow them to budget more effectively.
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