Significant changes are on the horizon for Medicare in 2025, which could greatly impact your prescription drug expenses.

Thanks to the Inflation Reduction Act, Medicare beneficiaries will experience the most substantial updates to the program’s drug coverage since its inception in 2006.

These updates are considered a major win for many beneficiaries, especially those who rely on expensive medications. However, it’s crucial to be aware of some key details and potential costs.

Four Major Medicare Changes for 2025

Medicare’s open enrollment period runs from October 15 to December 7. During this time, individuals with Medicare can review their plans and make adjustments to their coverage, which will take effect on January 1.

If you’re among the more than 66 million people enrolled in Medicare, it’s vital to understand the upcoming changes so you can make well-informed decisions.

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

1. $2,000 Annual Out-of-Pocket Drug Cap

The Inflation Reduction Act, enacted in 2022, initiated significant changes to the Medicare program that will be phased in over time. The latest provision will take effect next year.

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

Here’s how the new system will function:

You’ll start with a deductible of $590 (up from $545 in 2024). After reaching the deductible, you’ll pay 25% of your drug costs during the initial coverage phase until your out-of-pocket spending hits $2,000. Once you reach this cap, you will transition to catastrophic coverage, where you won’t incur any additional out-of-pocket costs for prescription drugs.

According to the Centers for Medicare & Medicaid Services (CMS), this provision is projected to save Medicare enrollees approximately $7.4 billion annually, equating to an average savings of nearly $400 per person for over 18.7 million beneficiaries in 2025, which represents about 36% of total Part D enrollment.

2. Part D Plan Premiums May Increase, But Average Costs Are Decreasing

While some Medicare beneficiaries will benefit from the new $2,000 cap—especially those using high-cost brand-name medications—others might experience rising premiums.

Before we get into the specifics, let’s briefly review how Medicare enrollees obtain prescription drug coverage.

The Part D market offers two types of plans, both managed by private health insurance companies that contract with the federal government and receive funding from CMS. One is a standalone plan that focuses solely on drug coverage, while the other is Medicare Advantage plans that include drug coverage along with other health services.

KFF, a nonpartisan health 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. These changes are partly driven by increased costs for insurers and limited hikes in government payments.

To help mitigate premium increases, a new initiative called the Part D premium stabilization demonstration has been introduced, capping monthly premium hikes at $35 for 2024 and 2025.

Therefore, standalone drug plan premiums could rise by as much as $35 per month compared to 2024 levels, although some plans might see more modest increases or even reductions.

That said, the average Part D premium is expected to decline. CMS estimates that the average premium for Part D beneficiaries will decrease by $7.45 in 2025, dropping to $46.50 from $53.95 in 2024.

While it’s useful to know the average costs of drug plans, be sure to check the premium of your specific plan—or any plans you’re considering switching to during open enrollment—to get a clearer picture of your actual costs.

3. Option to Pay Drug Costs Over Time

Starting in 2025, Medicare prescription drug plans will be required to offer enrollees the option to pay their out-of-pocket prescription drug costs in monthly installments throughout the year, rather than paying the full amount upfront at the pharmacy.

If you decide to enroll in the Medicare Prescription Payment Plan, you will receive a bill from your Medicare Advantage or standalone Part D plan for your drug expenses instead of paying at the pharmacy. There are no additional costs to join this program.

To sign up or find out more, contact your Medicare prescription plan provider.

4. Potential Increase in Medicare Part B Premium and Deductible

The Medicare Part B premium and deductible are adjusted annually. In 2025, an increase is anticipated, though specific changes have not yet been announced. Medicare Part B covers a wide array of outpatient services, including doctor visits, outpatient surgeries, and medical devices.

It’s important for beneficiaries to stay informed about the costs associated with Medicare Part B premiums and deductibles. All Medicare enrollees are responsible for these costs, whether they are enrolled in a Medicare Advantage plan or Original Medicare.

For most enrollees, the Part B premium is automatically deducted from their monthly Social Security check. However, it’s worth noting that state cost-saving programs and Medicare Advantage plans may help reduce or eliminate the Part B premium for lower-income beneficiaries.

What to Do During Medicare Open Enrollment

Medicare open enrollment occurs annually from October 15 to December 7. During this period, you can switch from Original Medicare to a Medicare Advantage plan (or vice versa), change between Medicare Advantage plans, or alter your Medicare Part D prescription drug plan.

You can use the Medicare Plan Finder tool to review available plans and enroll in a new one online or by phone.

When assessing Medicare costs, consider factors beyond just the monthly premiums. Deductibles, copays, and access to services all play a role in the overall cost. Opting for the plan with the lowest premium may not always be the best choice, as lower premiums can lead to higher out-of-pocket expenses or limited drug coverage.

If you’re finding it difficult to manage your Medicare costs, you might qualify for the Extra Help program. Eligible individuals typically pay up to $4.50 for generic drugs and $11.20 for brand-name drugs with this assistance.

If you’re enrolled in a Medicare plan, you should have received an Annual Notice of Change letter in September.

Be sure to review this letter closely, as it outlines any cost changes to your current plan and includes the drug list (formulary). Check to ensure your current medications are still covered and verify if their tier levels or your out-of-pocket costs have changed.

Bottom Line

The changes to Medicare in 2025 could significantly impact your drug costs and how you handle your payments. Use the open enrollment period to compare plans, ensure your medications are covered, and explore options like the Extra Help program to lower your expenses.

Whether you’re already enrolled in Medicare or nearing eligibility, now is the time to understand how these updates will influence your budget and how you can take advantage of them.

Need help? Call Health Plans in Oregon: 503-928-6918. Our assistance is at no cost to you.