4 big changes every subscriber should know about

Big changes are coming to Medicare in 2025 and could make a big difference in prescription drug costs.

Thanks to the Inflation Reduction Act, Medicare beneficiaries will see the most significant updates to the program’s drug coverage since it was first introduced in 2006.

These updates are seen as a big win for many beneficiaries, especially those on expensive drugs, but there are some important details and potential costs to keep in mind.

4 big changes to Medicare for 2025

Medicare Open Enrollment runs from October 15th to December 7th. During this annual event, people with Medicare can review plans and make changes to their Medicare coverage, which goes into effect on January 1.

If you’re one of the more than 66 million people enrolled in Medicare, it’s important to understand upcoming changes to the program so you can make informed decisions.

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

1. $2,000 annual drug limit

The Inflation Relief Act, signed into law in 2022, greenlighted significant changes to the Medicare program. These measures are being implemented over time, with the newest provision coming into effect next year.

Starting in 2025, out-of-pocket costs for drugs will be capped at $2,000 a year, and the “doughnut hole” for prescription drugs will be eliminated.

Here’s how the new system will work:

You’ll pay a deductible of $590 (up from $545 in 2024). Once you meet your deductible, you’ll pay 25% of drug costs during the initial coverage phase until you out of pocket expenses reach $2,000. Once you reach this limit, you’ll enter what’s called catastrophic coverage and pay no additional out-of-pocket costs for your prescription drugs.

This provision is expected to save Medicare enrollees about $7.4 billion annually, according to the Centers for Medicare and Medicaid Services (CMS). This translates to an average savings of nearly $400 per person for more than 18.7 million beneficiaries in 2025, or about 36% of all Part D enrollments.

2. Some Part D plan premiums may go up, but the average cost goes down

While some Medicare beneficiaries will save money on health care costs thanks to the new $2,000 cap, especially those on expensive brand-name drugs, others could 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 marketplace has two types of plans, both of which are administered by private health insurance companies that contract with the federal government and receive funding from CMS. One is a stand-alone plan that only provides drug coverage, and the other is Medicare Advantage plans that combine drug coverage 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 spending cap. This is partly due to increased costs for insurers and limited increases in government payments.

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

So, at most, premiums for stand-alone drug plans could rise by $35 a month above 2024 levels. But some plans may see more modest increases, or even decreases.

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

While it’s helpful to understand average drug plan costs, you’ll need to look at your specific plan’s premium — or any plan you’re considering switching to during open enrollment — to understand the true cost.

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

Starting in 2025, Medicare prescription drug plans must give enrollees the option to spread their out-of-pocket costs for prescription drugs into monthly payments throughout the year instead of paying them all at once at the pharmacy.

If you choose to enroll in the Medicare Prescription Payment Plan, you’ll get a bill from your Medicare Advantage plan or stand-alone Part D for drug costs instead of paying at the pharmacy. There is no additional cost to participate in the program.

To enroll or learn more, contact your Medicare prescription plan provider.

4. Potentially higher premium and deductible for Medicare Part B

The Medicare Part B premium and deductible changes every year. In 2025, it will likely increase, 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 premiums and deductibles are important information for beneficiaries. All Medicare enrollees pay these costs—whether they’re part of a Medicare Advantage or Original Medicare plan.

Most enrollees have Part B first automatically deducted from their monthly Social Security check. It should be noted, however, that state cost-saving programs as well as programs through Medicare Advantage plans can help lower or eliminate the Part B premium for lower-income beneficiaries.

What to do during Medicare Open Enrollment

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

You can review plans using Medicare plan search tool and enroll in a new plan online or by phone.

When evaluating Medicare costs, consider factors beyond monthly premiums. Deductibles, co-pays and access to services all contribute to the total cost. Choosing the lowest premium plan may not always be the best option. Lower premiums could mean higher out-of-pocket costs or limited drug coverage.

If you struggle to afford Medicare, you may qualify for the Extra Help program. Those who are eligible 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 change notification letter in the mail in September.

Read this letter carefully. It will show the cost changes to your current plan, as well as the drug list, also known as the formulary. Check if your current drugs are still covered and see if their levels 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, federally funded programs can help.

The State Health Insurance Assistance Program (SHIP) provides individual 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 using online NAVE regional locator instrument. Or you can call the national hotline at 877-839-2675.

Conclusion

Medicare changes in 2025 could make a big difference in drug costs and how you manage your payments. Take time during open enrollment to compare plans, confirm your drugs are covered, and check out options like the Extra Help program to lower costs.

Whether you are currently enrolled in Medicare or approaching eligibilitynow is the time to understand how these updates will affect your budget and how you can make them work for you.