Big changes in 2025 affecting drug costs and coverage

• In 2025, a $2,000 annual out-of-pocket cap will keep costs down for Medicare enrollees for drugs covered by Part D plans.
• A payment plan allows Medicare members to pay for their medications in limited monthly installments rather than paying the full cost upfront at the pharmacy.
• A decline in the number of standalone Part D drug plans means fewer choices for enrollees, which can simplify the process of selecting a Medicare plan.

In 2025, Medicare Part D prescription drug plans will make several changes that could potentially impact enrollees' benefits and costs, including changes to premiums, a new cap on out-of-pocket costs, and a reduction in the number of medication plans offered.

“Overall, these changes in 2025 provide a good balance between cost management and additional protection for Medicare beneficiaries,” said Brandy Burch, CEO of BenefitBay.

“For most people, these updates will provide more stability and predictability to their healthcare spending,” Burch told Healthline, “which can make a big difference when it comes to planning for the coming year.”

Here's an overview of the five major changes to Medicare Part D prescription drug plans.

The base premium for Medicare Part D beneficiaries will increase in 2025 compared to last year. However, this does not mean that Medicare enrollees will have to pay more out of pocket each month for their Part D drug benefits.

The Inflation Reduction Act also provides for a premium stabilization mechanism. This limits actual premium increases for Part D plans to an average of about $2 per month.

The base premium is not what Part D enrollees pay each month. This is the permissible basic amount for premiums.

However, a recent analysis from ValuePenguin found that total Medicare Advantage premiums for 2025 will rise 4% compared to last year – from $24 to $25 per month. This rate change varies by state.

Because these are average changes, your plan's premiums may change by a different amount – up or down. It's important to shop around during the Medicare Open Enrollment period, which runs from October 15 to December 7, to find the best plan for your budget and needs.

You may have heard about the “donut hole” – or gap in prescription drug coverage – in Medicare Part D.

You enter this loophole once your Medicare Part D plan has paid a certain amount for your prescription drugs in a single coverage year. From that point on, you'll pay more out-of-pocket for your prescription medications until you reach your annual limit.

Depending on your plan, the plan may help you cover the cost of your prescription drugs again when you reach your annual limit.

If that sounds confusing, don't worry. The donut hole will disappear after 2024 and will be replaced by a new cap of $2,000 out of pocket in 2025. This change due to the Inflation Reduction Act affects all Medicare plans.

Once you pay $2,000 out-of-pocket for covered medications in a calendar year, you automatically receive “catastrophic coverage.” Therefore, you won't have to pay out-of-pocket for Part D covered medications for the rest of the year.

An estimated 1.4 million Medicare Part D enrollees without low-income subsidies are expected to benefit from the $2,000 out-of-pocket cap, KFF reports. The annual personal expenditure of these people was above this limit.

Burch said the $2,000 out-of-pocket cap will have a big impact on Medicare enrollees.

“For people who rely on expensive medications, this cap means they can finally plan their healthcare budget without worrying about unexpectedly high costs,” she said. “It's a great step toward peace of mind knowing that once they reach the $2,000 threshold, they're covered for the rest of the year.”

This change will not only lower medication out-of-pocket costs for participants – particularly those who take multiple or high-cost medications – but it will also likely help them take their medications as prescribed, which can improve their health outcomes.

In 2025, Part D enrollees will also have the option to pay their prescription drug costs in limited monthly installments rather than paying all at once at the pharmacy.

The Medicare Prescription Payment Plan is available free of charge for all plans, including Medicare drug plans and Medicare Advantage plans with drug coverage. However, participation is voluntary.

If you choose this option, instead of paying for your medications at the pharmacy, you will receive a monthly bill through your Medicare drug plan or Medicare Advantage plan.

“The [payment plan] makes the costs [of drugs] Feel more manageable as you break it down over time,” Burch said. “It's like having some breathing room instead of being hit with a big payment all at once. And this flexibility can be a relief for those on a tight budget.”

Jenn Kerfoot, chief strategy and growth officer at DUOS, pointed out that people with a Medicare Prescription Payment Plan cannot be sent to a credit collector for not paying their bills. However, the plan can put them off the payment plan if they don't pay their bills, she told Healthline.

KFF reports that in 2025 there will be 26% fewer stand-alone Part D plans than last year and 5% fewer Part D plans for low-income subsidy (LIS) recipients.

These declines are due to changes resulting from the Inflation Reduction Act, which takes effect in 2025, including the $2,000 out-of-pocket cap. Part D plans and drug manufacturers will also have to cover a larger share of drug costs above the cap, and Medicare will cover fewer drug costs.

However, KFF said enrollees in each state will still be able to choose from at least a dozen standalone plans and many Medicare Advantage drug plans.

While some people may end up losing their current plan, fewer plans overall could help make things easier for people during open Medicare enrollment.

“Fewer choices means people don't have to spend as much time evaluating and comparing endless options, which can be overwhelming,” Burch said. “For many older adults, a streamlined set of options can make the process easier and help them focus on finding the best solution without much guesswork.”

With the donut hole disappearing due to the new $2,000 deductible cap, the Coverage Gap Discount Program is no longer required.

It will be replaced by the manufacturer discount program from 2025. Under this program, the manufacturer typically pays a 10% discount for brand-name drugs and biologics during the initial Part D coverage period, CMS said.

When a beneficiary reaches the catastrophic phase — past the $2,000 out-of-pocket cap — the manufacturer typically offers a 20% discount on these drugs and biologics.

“This change may change the way drug discounts are applied, particularly for brand-name drugs,” Burch said. “But the good news is the financial relief [for enrollees] because recipes should still be there.”

However, “during open enrollment, it is important for participants to revisit how this update may impact their specific medications,” she added. “This way you avoid cost surprises.”

Kerfoot recommends that people consider several things when purchasing a Medicare drug plan this year, including whether their plan will still be offered in 2024, whether their existing plan has reduced their benefits, whether the medications they take are still covered by the plan are covered and whether the premium has changed.

Burch also suggests that people keep an eye on the five big changes coming next year.

“With adjustments to deductible limits, payment options and plan options, it is important to select a plan that best fits their specific health and financial needs,” Burch said. “Taking a little more time now to understand the new landscape can save a lot of worry and potentially a lot of money over the course of 2025.”

In 2025, several changes will be made to Medicare Part D prescription drug plans that could impact drug costs and insurance coverage. One change is an annual out-of-pocket cap of $2,000. Once participants reach this limit, they no longer have to pay for their medications out of pocket for the rest of the year.

A new payment plan will also be introduced in 2025, allowing participants to pay for their medications in limited monthly installments instead of paying for everything at once at the pharmacy. This free option is available for all Part D plans, including Medicare Advantage plans with drug coverage. Participation is voluntary.

There will be 26% fewer stand-alone Part D plans in 2025 than in 2024, and slightly fewer Part D plans for low-income older adults. However, there are at least a dozen standalone plans available in every state, so participants still have options.