For the nearly 66 million Americans covered by Medicare, 2025 promises to bring some welcome changes. These changes will be of special benefit to those with expensive prescription drugs – but most beneficiaries will see at least some changes for the better.
To explain what’s coming for Medicare next year, we reviewed this recent article from AARP, prepared by contributing writer Kimberly Lankford. She explains that the changes, mandated by the Inflation Reduction Act of 2022, represent some of the most significant adjustments in several years. The AARP article goes into far more detail than we have space for here on the Blog. But we’ll do our best to cover the basics, and we encourage you to check out the full report online.
Part D Changes in 2025 Follow the Pattern of Previous Years
“You can thank the Inflation Reduction Act of 2022 for some of the biggest Medicare changes in the past few years — including a welcome reprieve from the high costs of prescription drugs,” AARP’s Lankford writes.
She explains that the new rules mark a continuing pattern of cuts to consumer drug costs initiated last year. “In 2023, Medicare capped covered insulin costs in Part D prescription drug plans at $35 a month and eliminated out-of-pocket costs for recommended vaccines,” says Lankford. “In 2024, the government expanded eligibility for financial assistance from the Part D Extra Help program.”
More recently, Medicare also announced the result of first-ever negotiations to reduce the costs of 10 of Medicare’s most expensive drugs, with lower prices taking effect in 2026. We wrote about the new changes here in a recent Blog article.
Cap on Part D Out-of-Pocket Cost Headlines 2025 Changes
According to AARP, one provision of the new law will have a greater impact than the rest. “One of the biggest changes takes effect in 2025,” says Lankford, “when Part D plans must cap out-of-pocket spending on covered drugs at $2,000 a year. That change will have a ripple effect on Part D and Medicare Advantage plans’ other costs and coverage, making it especially important to review your options during open enrollment this year.”
But while the Part D rules overshadow other 2025 Medicare changes, other benefits will kick in starting in January that will affect Medicare Advantage policy-holders, expand benefits for family caregivers, and improve access to more mental health providers. Here’s AARP’s run-down of changes to anticipate.
Medicare Changes Will Cap Out-of-Pocket Drug Costs at $2,000
This is the biggest news for 2025. The $2,000-a-year out-of-pocket limit for prescription medications will apply to stand-alone Medicare Part D policies and drug coverage in Medicare Advantage plans. It doesn’t apply to so-called Part B drugs administered by a physician in the office or clinic as part of a doctor’s treatment plan.
“It’s the first time in the history of the Medicare program that people have a cap on how much they could have to pay out of pocket,” Meena Seshamani, M.D., the director of the federal Center for Medicare, said in an interview with AARP. “And such a significant change means that in open enrollment, it is so important to shop. Because with such big changes, there very well could be a plan that better suits your health and financial needs.”
As Lankford explains, “The $2,000 cap includes deductibles, copayments and coinsurance for covered drugs. It doesn’t apply to premiums or to drugs a plan doesn’t cover.” There is a provision for future adjustments to the cap should Part D costs rise.
Medicare Changes Eliminate the Part D “Donut Hole”
Part D drug plans have been known for their complex phases of coverage. The AARP explains the sequence of these phases this way.
Your Deductible: Part D plans require you to pay the full cost of drugs until you meet your deductible, which – depending on your plan – can be as high as $545 in 2024.
Initial coverage begins as Medicare starts bearing some of the cost and you make required copayments.
Coverage gap, commonly known as the donut hole. It starts when you and your drug plan have spent a total of $5,030 on covered medications (the 2024 figure). Once you’re in this gap, your plan could pay less and demand dispensing fees plus higher out-of-pocket costs. The donut hole could leave you paying up to $3,000 out-of-pocket.
Catastrophic coverage: Once you have paid $8,000 out-of-pocket, you’re in the catastrophic phase and pay nothing for covered prescriptions until the new year begins on January 1, 2025.
Millions Will Benefit as “Donut Hole” Disappears
But in 2025, the rules will change, says Lankford. “Part D plans can have a deductible up to $590,” she writes. “Then you pay copayments for your medications until your total out-of-pocket costs reach $2,000. The cap is expected to help millions of people.” The figures bear this out. CMS reports that more than 1.7 million beneficiaries had already reached the $2000 out-of-pocket threshold as of last April!
“People with high drug costs tend to pay a lot at the beginning of a year,” Lankford adds. “The Medicare Prescription Payment Plan will let enrollees opt to pay their prescription costs monthly rather than all at once, enabling beneficiaries to spread out the out-of-pocket drug costs over the course of the year.”
The AARP article addresses the fear that Part D insurers would simply boost premiums to cover any revenue lost by these new protective limits. To guard against that practice, the Inflation Reduction Act included a 6 percent cap on base Part D premiums. “The 2025 Part D base premium is $36.78,” Lankford adds, “but actual premiums vary depending on your location and plan.”
Medicare Changes Will Boost Access to Weight Loss Drugs
In what seems like a loophole, Medicare will now cover some well-known weight loss drugs. But here’s the caveat: if these drugs are prescribed solely for weight loss, Medicare won’t cover them. They have to be prescribed to treat something else.
“Medicare is prohibited from covering drugs prescribed specifically for weight loss,” Lankford explains. “But Part D plans can cover popular weight loss drugs when they’re ordered for other purposes, such as Ozempic and Mounjaro for type 2 diabetes.” The FDA approved the drug Wegovy last March for overweight patients with cardiovascular disease. This change didn’t show up in most Part D plans in 2024, but coverage will be more common in 2025.
“We estimate that roughly 1 in 4 Medicare beneficiaries with obesity or who are overweight could be eligible for Wegovy to reduce the risk of serious heart disease,” Medicare policy expert Tricia Neuman told AARP. “On the one hand, Wegovy is likely to be subject to relatively high cost-sharing because of its high price, but on the other hand, Part D enrollees who take these drugs will benefit from having the new $2,000 cap on their drug expenses.”
As the FDA approves weight loss drugs to treat other conditions, look for more Part D plans to expand coverage.
Medicare Changes Also Benefit Medicare Advantage Customers
If you’re on a Medicare Advantage plan, you’ll also benefit from the $2,000 out-of-pocket spending cap, which applies to deductibles, copayments and coinsurance in the prescription drug portion of your plan.
In order to cover added costs or loss of revenue, says AARP, Medicare Advantage insurers may trim benefits slightly. They may adjust their list of covered drugs or increase the percentage you pay for some services. They could make extras like dental and vision coverage “a little less generous” than before, experts say.
“The devil’s in the details,” warns Lankford. “Review your plan’s annual notice of change carefully. Don’t just rely on the general description of coverage in the Medicare Plan Finder when comparing Medicare Advantage plans. Look at the details in the Explanation of Benefits on the plan’s website before making a final decision. Also reconfirm that your providers are in the plan’s network.”
MA Policy Holders Will Get a Mid-year Benefit Statement
As of last April, Medicare Advantage is now the choice of just over half (50.4 percent) of all Medicare beneficiaries. Many sign up for their MA plans based on benefits they never use.
Starting next year, insurers will have to alert you of these untapped benefits in the form of a midyear statement. For example, if you haven’t used portions of your dental, vision, hearing or fitness benefits, you’ll be notified by your company if you have any benefits left, says AARP.
There are also new rules designed to force firms to market MA plans more realistically. “Rules that took effect last year before open enrollment prohibited Medicare Advantage ads from mentioning benefits not available in the area where the ad appears,” writes AARP’s Lankford. “The ads also can’t mislead you into thinking you’re contacting a government employee when you call with questions.”
Medicare Changes Expand Services and Support for Family Caregivers
The 2025 changes promise benefits for the unseen and under-appreciated army of caregivers in the U.S. According to AARP a program for dementia patients and their caregivers that launched in 2024 will increase fourfold in 2025, serving more of the country.
Lankford writes, “The program, called Guiding an Improved Dementia Experience (GUIDE), provides a 24/7 support line, a care navigator to find medical services and community-based assistance, caregiver training and up to $2,500 a year for at-home, overnight or adult day care respite services. Patients and their caregivers typically won’t have copayments.”
To launch the program on July 1st of this year, says AARP, CMS selected 96 organizations to participate, including medical centers, hospitals, group practices and community-based organizations. Beginning in July 2025, 294 more organizations will be added.
In order to take part, participants must be enrolled in original Medicare Parts A and B and have a dementia diagnosis. They can’t be in hospice or a nursing home. Families can visit the CMS GUIDE program fact sheet and the link to the CMS Innovation website to see if services are available where you live.
“Programs that will begin in July 2025 are listed,” says Lankford. “Contact the program to learn more about eligibility and request an assessment.”
Medicare Changes Will Add More Mental Health Providers
Access to mental health services is a chronic healthcare problem in the U.S., experts agree. For those on Medicare, the coverage door was closed and barred – until now.
“Before this year, licensed marriage and family therapists, mental health counselors and addiction counselors couldn’t bill Medicare because they weren’t allowed to enroll as Medicare providers,” the AARP article explains. “Now they can, and some have.”
Experts suggest that over 400,000 behavioral health clinicians could qualify for Medicare eligibility, and many thousands have enrolled, but coverage is not automatic. Ask your provider if he or she accepts your Medicare plan.
Medicare Changes Mean You Need to Do Your Honmework
These benefit changes will demand that beneficiaries check coverage and costs carefully this fall.
“The bottom line,” says Lankford: “You may see a big variation in premiums, copayments and covered drugs during open enrollment this year. Look at the annual notice of change that your plan must send in September outlining changes to your plan for 2025.”
Remember, starting October 1st, new and returning policy-holders can compare coverage and costs by using the Medicare Plan Finder and choosing a 2025 plan during open enrollment from October 15th to December 7th. You can get help for free from your State Health Insurance Assistance Program (SHIP), says AARP.
(originally reported at www.aarp.org)