Open enrollment for Medicare is coming to a close, and while there is pressure to make a decision quite quickly, there are things that should be taken into account before making any big changes to your current plan.
There are four main changes to the way the program will work in 2025 and figuring them out before the Dec. 7 deadline will be important.
These changes that will affect the more than 66 million people enrolled in Medicare come thanks to the Inflation Reduction Act (IRA), which is being implemented slowly but surely and aims to help beneficiaries have better healthcare coverage.
1. $2,000 annual out-of-pocket drug cap
Historically, Medicare coverage has worked with a “doughnut hole” system, which thanks to the IRA has now been eliminated in favor of a $2,000 per year out-of-pocket drug spending cap.
How this will work in practical terms is, enrollees will face a $590 deductible, an increase from $545 in 2024. After meeting the deductible, they’ll pay 25% of their drug costs during the initial coverage phase until out-of-pocket spending reaches $2,000. Beyond this limit, catastrophic coverage begins, eliminating additional out-of-pocket expenses for prescription drugs. The Centers for Medicare & Medicaid Services (CMS) estimate this change will save enrollees about $7.4 billion annually, averaging nearly $400 per person for over 18.7 million beneficiaries, representing approximately 36% of total Part D participants.
2. Some Part D plan premiums may increase — but the average cost is going down
Part D is the part of Medicare that deals with prescription drug coverage. It is always managed by a private insurance company and can be “purchased” on its own or as a part of a bundle along with Part C or Medicare Advantage plan.
Because of the $2,000 cap many will see their premiums rise, although for those taking expensive medications the rise will likely still be lower than the price of their medications. The nonpartisan health policy research organization KFF warns of the possibility of many plans adjusting their premiums, formularies, copays or deductibles in response to the new $2,000 out-of-pocket spending cap.
Foreseeing this possibility, the government established a monthly increase cap of $35 in 2024 and 2025.
3. You can choose to pay your drug costs over time
Another interesting change is that in 2025 Medicare prescription drug plans must offer the option to spread their out-of-pocket prescription drug costs into monthly payments throughout the year. Previously, the cost had to be paid in advance or all at once in the pharmacy, which caused plenty of problems for those taking a lot of medication, especially at the beginning of the year before the hardship payments kicked in.
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Now, the new Medicare Prescription Payment Plan will ensure that a bill is issued from your Advantage or standalone Part D plan for your drug costs instead of paying at the pharmacy.
4. Higher Medicare Part B premium and deductible
Medicare Part B costs are adjusted annually. In 2025, the standard monthly premium will rise to $185, a 5.9% increase from $174.70 in 2024. Part B provides coverage for various outpatient services, such as doctor visits, outpatient surgeries, and medical devices. The annual deductible will increase to $257, up 7.1% from $240 in 2024. Beneficiaries must meet this deductible before Original Medicare begins covering expenses.
Since every Medicare enrollee pays the costs of Part B premiums, knowing the increase and the extent of out of pocket expenses is important, regardless of if they are part of a Medicare Advantage plan or just Original Medicare. Also, since most Medicare enrollees are also Social Security recipients, knowing how much will be deducted from their monthly checks will help them budget better.