4 big changes every registrant needs to know

Big changes are coming to Medicare in 2025 that could make a big difference in the cost of your prescription drugs.

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

These updates are seen as a big win for many beneficiaries, especially those taking expensive medications, but there are some important details and potential costs to consider.

Four big Medicare changes for 2025

Open enrollment for Medicare runs from October 15 to December 7. This annual event allows people with Medicare to review plans and make changes to their Medicare coverage, which will go into effect on January 1.

If you are one of the more than 66 million people enrolled in Medicare, it is important that you understand the upcoming program changes so you can make informed decisions.

With Medicare open enrollment in full swing, here’s everything you need to know.

1. Annual $2,000 co-medication limit

The Inflation Reduction Act, which was signed into law in 2022, greenlighted major changes to the Medicare program. These measures will be rolled out over time and the latest provision will come into effect next year.

Beginning in 2025, out-of-pocket drug spending will be capped at $2,000 per year and the “doughnut hole” for prescription drugs will be eliminated.

This is how the new system works:

You will pay a deductible of $590 (up from $545 in 2024). Once you reach the deductible, you will pay 25 percent of your drug costs in the initial coverage phase until your out-of-pocket expenses reaches $2,000. Once you reach this limit, you will benefit from so-called catastrophic coverage and will not pay any additional out-of-pocket costs for prescription drugs.

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

2. Some premiums for Part D plans may increase, but average costs will decrease

While some Medicare beneficiaries will save money on healthcare costs the new $2,000 limit, especially those taking expensive brand-name medications, allowed others to see their premiums rise.

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

The Part D market has two types of plans, both of which are administered by private health insurers that contract with the federal government and receive funding from CMS. One is a standalone plan that only provides drug coverage, and the other is Medicare Advantage plans that bundle drug coverage with other health care services.

KFF, a nonpartisan health care 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 cap. This is partly due to higher costs for insurers and limited increases in government benefits.

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

So premiums for standalone drug plans could increase by at most $35 per month over 2024 levels. But some plans could see a more modest increase or even decrease.

That said, the average Part D premium is declining, according to CMS. The estimated average premium for the Part D beneficiary is expected to decrease by $7.45 in 2025, from $53.95 in 2024 to $46.50 in 2025.

While it’s helpful to understand the average cost of a drug plan, you need to look at the premium of your specific plan (or the plans you’re considering switching to during open enrollment) to understand the true cost.

3. You can choose to pay your drug costs over time

Beginning in 2025, Medicare drug plans must offer enrollees the option to spread their out-of-pocket prescription drug costs over monthly payments throughout the year, rather than paying for 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 standalone Part D plan for your drug costs, instead of having to pay at the pharmacy. There are no additional costs associated with participating in the program.

To enroll or for more information, contact your Medicare prescription provider.

4. Potentially higher Medicare Part B premium and deductible

Your Medicare Part B premium and deductible change every year. This is likely to increase in 2025, 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 devices.

Medicare Part B premium and deductibles are important information for beneficiaries. All Medicare participants pay these costs, whether they have a Medicare Advantage plan or Original Medicare.

Most enrollees have the Part B premium automatically deducted from their monthly Social Security check. However, it should be noted that state cost savings programs and programs through Medicare Advantage plans can help reduce or eliminate the Part B premium for lower-income beneficiaries.

What to do during Medicare open enrollment

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

You can view plans using the Medicare Plan Finder tool and register for a new subscription online or by telephone.

When evaluating Medicare costs, consider factors beyond monthly premiums. Deductibles, copays, 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 your Medicare costs, you may qualify for the Extra Help program. Those who qualify 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 an annual notice of change in the mail in September.

Please read this letter carefully. It provides an overview of the cost changes in your current plan, as well as the drug list, also called a Formulary. Check if your current medications are still covered and check if their level or your out-of-pocket costs have changed.

Get help from SHIP

Navigating Medicare can be complex. If you need help exploring your options, a network of free, government-funded programs can help.

The State Health Insurance Assistance 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 advisor can help you with many things, including comparing drug plans, identifying potential savings, and answering open enrollment questions — all at no cost.

You can find your SHIP online SHIP Regional Locator tool. Or you can call the National Network Hotline at 877-839-2675.

In short

The changes to Medicare in 2025 could make a big difference in your drug costs and the way you manage your payments. During open enrollment, take the time to compare plans, check if your medications are covered, and explore options like the Extra Help Program to lower your costs.

Whether you are a current Medicare enrollee or approaching fitnessnow is the time to understand how these updates will impact your budget, and how you can make them work for you.