What is New for Medicare Part D in 2025?

Written and medically reviewed by Dorcas Morak, Pharm.D

Medicare Part D continues to evolve, with significant changes scheduled for implementation in 2025. The Inflation Reduction Act of 2022 introduces various provisions to lower prescription drug costs for Medicare enrollees, including a new cap on out-of-pocket expenses. Understanding these updates is essential for beneficiaries seeking to manage their healthcare expenses effectively. Below are the key changes taking place in 2025.

New $2,000 Cap on Out-of-Pocket Costs

In 2025, Medicare Part D will introduce a $2,000 cap on out-of-pocket drug spending for enrollees. This means that once beneficiaries reach this threshold, they will no longer pay out-of-pocket for their medications for the rest of the calendar year. This cap applies to all drugs covered under Medicare Part D, providing financial relief for those with high prescription costs. Under the new rules, drug manufacturers will also cover a larger share of costs during the catastrophic phase, which will reduce Medicare’s reinsurance liability and improve the program’s financial sustainability.

Simplified Coverage Structure

Previously, beneficiaries were responsible for paying 25% of their drug costs in the coverage gap phase, commonly known as the "donut hole." Although the gap was effectively closed in 2020, the system remains somewhat complex. In 2025, the structure will become even more straightforward. Here's how it works:

• After meeting the deductible, beneficiaries will continue to pay 25% of their prescription costs during the initial coverage phase.
• Once they reach the $2,000 spending cap, beneficiaries will pay nothing for their medications for the rest of the year.
• During the catastrophic phase, Part D plans (insurance companies) will cover 60% of drug costs (an increase from 20% in 2024), drug manufacturers will provide a 20% discount on brand-name drugs, and the federal government will pay the remaining 20%. Beneficiaries will no longer have to pay out-of-pocket in the catastrophic phase. This simplified structure eliminates the need to think about a "coverage gap" or "donut hole," and it ensures that once beneficiaries reach the $2,000 cap, they no longer bear any additional costs for their prescriptions.

New Payment Options for Medicare Part D in 2025

Starting in 2025, Medicare Part D will introduce a new payment option to help beneficiaries manage their out-of-pocket costs. Beneficiaries will have the ability to spread their out-of-pocket expenses over the course of the year, instead of paying the full amount upfront when they reach the $2,000 cap.

This "smoothing" payment option works as follows:

• Instead of paying large out-of-pocket costs all at once for expensive drugs early in the year, enrollees can choose to make smaller, predictable monthly payments over the course of the year.
• The goal is to ease the financial burden on beneficiaries, especially those who need high-cost medications at the start of the year. This new payment option will provide more flexibility and budgeting predictability for Medicare Part D enrollees, reducing the risk of financial strain when they encounter large prescription drug costs.

Premium Adjustments for 2025

For 2025, the Centers for Medicare & Medicaid Services (CMS) has set the base beneficiary premium at $36.78, a modest increase of $2.08 (6%) from the previous year. This increase is capped under the provisions of the Inflation Reduction Act to prevent steep hikes.

Actual premiums vary by plan, so beneficiaries should carefully review their options during the open enrollment period, which runs from October 15 to December 7. Premiums can range from $0 to over $100 per month, depending on the plan.

Premium Stabilization Measures

CMS has introduced the Part D Premium Stabilization Demonstration for stand-alone prescription drug plans (PDPs) to stabilize the market. This initiative includes key measures such as:

• Reducing premiums by up to $15 for eligible plans.
• Capping premium increases at $35 between 2024 and 2025.
• Raising government risk-sharing for specific costs from 80% to 90%, which reduces the financial burden on beneficiaries and insurers alike. These steps aim to maintain competitive premiums and provide stability for enrollees as they navigate the complex landscape of prescription drug plans.

Implications for Beneficiaries

As these changes roll out in 2025, beneficiaries can expect a more user-friendly Medicare Part D experience. The new $2,000 out-of-pocket spending cap will significantly benefit those who rely on costly medications, providing financial protection for the rest of the year once they hit the cap.

The streamlined pricing structure, with a consistent 25% coinsurance until the cap is reached, will eliminate confusion about the "donut hole" and ensure beneficiaries face predictable costs.

However, it remains crucial for enrollees to carefully review their plan options during the open enrollment period to select a plan that best meets their healthcare and financial needs.

Using RxLess for Medications Not Covered by Medicare Part D

While Medicare Part D provides substantial coverage for many prescription drugs, there are still some medications that may not be covered under your plan. This is especially true for:

• Lifestyle medications: Drugs like those for weight loss (e.g., phentermine) or erectile dysfunction (e.g., Viagra) are generally not covered by Medicare Part D.
• Certain over-the-counter (OTC) medications: Even though some OTC medications may be recommended and prescribed by a healthcare provider, they are often excluded from Medicare Part D coverage.
• Cosmetic medications: Drugs used for conditions that are considered cosmetic, such as those for hair loss (e.g., Propecia), are typically not covered.
• Experimental or newer treatments: Some newly approved drugs or treatments that are considered experimental may not be included in Medicare’s formulary until they gain broader acceptance or approval.

In these cases, RxLess can be a valuable resource. RxLess offers discounted prescription prices on a wide range of medications that Medicare Part D. Beneficiaries can enroll in the RxLess Assurance Plan by downloading the free app to find and compare prices for these medications, ensuring they are able to obtain necessary drugs at lower prices without relying on Part D coverage.

By using RxLess, enrollees can save on their prescriptions by accessing discounts at pharmacies nationwide. Simply searching for the medication on RxLess.com and using the coupon at a participating pharmacy can significantly reduce out-of-pocket expenses for drugs not covered under Medicare.

Conclusion

The changes to Medicare Part D in 2025 provide considerable financial protection for beneficiaries, especially those with high prescription drug costs. With the introduction of the $2,000 out-of-pocket spending cap and simplified cost-sharing phases, enrollees will enjoy a more straightforward and cost-effective experience. However, for medications not covered by Medicare Part D, RxLess can help beneficiaries access affordable pricing options for a broader range of prescriptions.

By staying informed and taking advantage of these options, Medicare enrollees can make sure they are getting the care and medications they need at the lowest possible cost.