Medicare in 2025: Key Changes and Updates

Annual changes to premiums and cost-sharing, as well as the continued rollout of significant Part D reforms included in the Inflation Reduction Act, can give rise to questions and confusion. Understanding what will be different this year can help beneficiaries better navigate their coverage and access care with fewer disruptions and lower costs. The most notable changes include:

$2,000 Out-of-Pocket Spending Cap for Part D

As part of a larger redesign of the structure of Part D plans included in the IRA, in 2025, beneficiaries have a $0 cost-sharing obligation during the catastrophic phase of coverage, which starts when out-of-pocket costs (deductibles, copays, and cost-sharing for covered drugs) reach $2,000. 

Simplified Part D Structure

Before 2025, Part D plans featured four distinct phases of coverage:

1. The Deductible Phase – The beneficiary was responsible for 100% of the drug’s cost.
2. The Initial Coverage Phase – Costs were shared between the beneficiary and the plan.
3. The Coverage Gap (or Donut Hole) – Expenses were divided among the beneficiary, the manufacturer, and, for certain medications, the government. Prior to the Affordable Care Act (ACA), the beneficiary bore 100% of these costs.
4. The Catastrophic Phase – Costs were shared between the plan (partially reimbursed by the government in some cases) and the beneficiary, with lower cost-sharing than in earlier phases.

The dollar amounts to reach each of these phases also used different counting methodologies – some costs that “counted” to get a person into the donut hole did not count towards reaching catastrophic coverage.

In 2025, plans can have three simplified phases:

1. The Deductible Phase — The beneficiary is responsible for 100% of drug costs up to $590.
2. The Initial Coverage Phase — Costs are shared between the plan and the beneficiary, the beneficiary portion paid in the form of a copay or coinsurance.
3. The Catastrophic Coverage Phase — The plan is responsible for all costs.

Both the limit for the end of the deductible period and the end of the initial coverage period use the beneficiary’s True Out Of Pocket (TrOOP) expenses (which include what the person themselves pays, plus payments made on their behalf by certain programs and charities).

Payment Plans Are Available for Out-of-Pocket Costs

Starting in 2025, beneficiaries can choose to spread their incurred out-of-pocket costs across the year. The program is optional and may be less useful to those who have relatively stable drug expenses.

It is important to note that the program does not reduce costs; it only distributes them across the remainder of the year.

For those who have high costs early in the year, people who will meet the $2,000 out-of-pocket cap and have no cost-sharing obligation for several months, or people who have discrete periods of higher expenses—for example, someone who is prescribed a shorter course of an expensive medication—the prescription payment plan can help spread costs. It is important to note that the program does not reduce costs; it only distributes them across the remainder of the year. People with unaffordable drug costs should also explore the Extra Help or Low-Income Subsidy program. 

Midyear Updates From Medicare Advantage About Supplemental Benefits

Supplemental benefits are a large reason why many choose to enroll in MA. In 2025, for the first time, MA plans will be required to remind people who haven’t used their supplemental benefits, including information about how to access them.