- In 2025, an annual $2,000 out-of-pocket cap will keep costs low for Medicare enrollees on drugs covered by Part D plans.
- A payment plan will allow Medicare enrollees to pay for their drugs in capped monthly installments rather than paying the full cost upfront at the pharmacy.
- A drop in the number of stand-alone Part D drug plans will mean fewer choices for enrollees, which may simplify the process of choosing a Medicare plan.
Several changes are coming to Medicare’s Part D prescription drug plans in 2025 that could potentially impact enrollees’ benefits and costs, including changes in premiums, a new out-of-pocket cap, and a drop in the number of drug plans being offered.
“All in all, these 2025 changes offer a good balance between managing costs and adding protections for Medicare beneficiaries,” said Brandy Burch, CEO at BenefitBay.
“For most people, these updates will provide more stability and predictability in their healthcare expenses,” Burch told Healthline, “which can make a big difference when it comes to planning for the year ahead.”
Here’s a rundown of the top five changes coming to Medicare Part D prescription drug plans.
Increase in Plan D prescription drug base premium
The Medicare Part D base beneficiary premium will increase in 2025 over the previous year. However, this doesn’t mean Medicare enrollees will pay more out of pocket each month for their Part D drug benefits.
Here’s why.
The base beneficiary premium will be $36.78 in 2025, a 6% increase from 2024, reports nonprofit KFF. This increase is capped at 6% due to a provision in the Inflation Reduction Act.
The Inflation Reduction Act also provides a premium stabilization mechanism. This limits the actual premium increases for Part D plans to about $2 per month on average.
The base premium is not what Part D enrollees pay each month. It is the base amount allowed for premiums.
The Centers for Medicare & Medicaid Services (CMS) projects that, thanks to the government’s premium stabilization efforts, the average monthly premium for stand-alone Part D plans will decrease by 4% to $40.00 in 2025.
Actual monthly premiums will range from $0 to $100 or more, reports KFF. In addition, enrollees with higher annual incomes ($103,000 or greater for individuals; $206,000 or greater for couples) will pay an income-related premium surcharge on top of the regular premium.
CMS projects that the average monthly premium for people with a Medicare Advantage plan that includes prescription drug coverage will fall by 13% to $13.50 in 2025.
However, a recent analysis by ValuePenguin found that overall Medicare Advantage premiums will increase by 4% for 2025 over the previous year — going from $24 to $25 per month. This rate change varies by state.
These are average changes, so 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.
In addition, over 14 million people with Medicare will have a $0 premium for Part D plans, thanks to the government’s Low Income Subsidy (LIS) program.
$2,000 out-of-pocket max and end of coverage ‘donut hole’
You may have heard about the “donut hole” — or gap in prescription drug coverage — about Medicare Part D.
You enter this gap once your Medicare Part D plan has paid a certain amount for your prescription drugs during a single coverage year. At this point, you’ll pay more out of pocket for your prescription drugs until you reach your yearly limit.
Depending on your plan, when you hit your yearly limit, the plan may help pay for the cost of your prescription drugs again.
If this sounds confusing, don’t worry. The donut hole will disappear after 2024 and be replaced by a new $2,000 out-of-pocket cap in 2025. This change, due to the Inflation Reduction Act, affects all Medicare plans.
Once you have paid $2,000 out of pocket for covered drugs during a calendar year, you will automatically get “catastrophic coverage.” As a result, you won’t have to pay out of pocket for drugs covered by Part D 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, reports KFF. These people had annual out-of-pocket spending above this limit.
Burch said the $2,000 out-of-pocket cap will have a big impact for Medicare enrollees.
“For people who rely on costly medications, having this cap means they can finally plan their healthcare budget without worrying about unexpected high costs,” she said. “It’s a big step in providing peace of mind and knowing that once they hit that $2,000 threshold, they’re covered for the rest of the year.”
This change will not only lower out-of-pocket drug costs for enrollees — especially for those taking multiple or high-priced medications — but it is also likely to help them take their drugs as prescribed, which can improve their health outcomes.
Payment plan to spread out drug costs
Also coming in 2025 is the option for Part D enrollees to pay their prescription drug costs in capped monthly installments instead of all at once at the pharmacy.
The Medicare Prescription Payment Plan is available for all plans at no cost, 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 drugs at the pharmacy, you will get a monthly bill from your Medicare drug plan or Medicare Advantage plan.
”This [payment plan] makes the cost [of drugs] feel more manageable by breaking it down over time,” said Burch. “It’s like having a bit of breathing room, rather than facing a large payment all at once. And that flexibility can be a relief for those on a tight budget.”
Jenn Kerfoot, chief strategy and growth officer at DUOS pointed out that people on the Medicare Prescription Payment Plan can’t be sent to a credit collector for not paying their bills. However, the plan can kick them off the payment plan if they don’t pay their bills, she told Healthline.
Fewer stand-alone Part D plans
KFF reports that in 2025, there will be 26% fewer standalone Part D plans than in the previous year and 5% fewer Part D plans for Low-Income Subsidy (LIS) beneficiaries.
These drops are due to changes stemming 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 pay a larger share of drug costs above the cap, and Medicare will pick up less for 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, having fewer plans overall could help simplify things for people during Medicare Open Enrollment.
“Fewer choices mean people don’t have to spend as much time evaluating and comparing endless options, which can be overwhelming,” said Burch. “For a lot of older adults, a streamlined set of options can make the process easier and help them focus on finding the best fit, without all the guesswork.”
New Manufacturer Discount Program
At the start of 2025, the Medicare Coverage Gap Discount Program will end. This program helps cover the cost of prescription drugs for Part D beneficiaries who reach the donut hole.
Since the donut hole is going away due to the new $2,000 out-of-pocket cap, the Coverage Gap Discount Program is no longer needed.
It will be replaced starting in 2025 by the Manufacturer Discount Program. Under this program, the manufacturer will typically pay a 10% discount for brand-name drugs and biologics during the initial Part D coverage phase, said CMS.
When a beneficiary reaches the catastrophic phase—after the $2,000 out-of-pocket cap—the manufacturer will typically offer a 20% discount on these drugs and biologics.
“This change may alter how drug discounts are applied, particularly for brand-name medications,” said Burch. “but the good news is that financial relief [for enrollees] for prescriptions should still be there.”
However, “it’s important for enrollees to double-check how this update might affect their specific medications during open enrollment,” she added. “That way, they can avoid any surprises when it comes to costs.”
Kerfoot recommends that people consider several things when shopping for a Medicare drug plan this year, including whether their plan from 2024 is still offered, whether their existing plan cut their benefits, whether the medications they are taking are still covered by the plan, and whether the premium changed.
Burch also suggests that people keep in mind the five major changes happening next year.
“With the adjustments to out-of-pocket limits, payment options and plan choices, it’s important to pick a plan that best aligns with their specific healthcare and financial needs,” said Burch. “Taking a little extra time now to understand the new landscape can help save a lot of worry, and potentially a lot of money, throughout 2025.”
Takeaway
Several changes are coming to Medicare Part D prescription drug plans in 2025 that could impact drug costs and plan coverage. One change is an annual $2,000 out-of-pocket cap. Once enrollees hit this limit, they won’t have to pay out of pocket for their drugs for the rest of the year.
A new payment plan is also starting up in 2025 that will allow enrollees to pay for their drugs in the form of capped monthly installments rather than all 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.
In 2025, there will be 26% fewer stand-alone Part D plans than in 2024 and slightly fewer Part D plans for low-income older adults. However, at least a dozen stand-alone plans are available in each state, so enrollees will still have options.
