Biggest Medicare Changes in 2025: What You Should Know
Key takeaways:
Starting in 2025, Medicare Part D will limit out-of-pocket costs for covered prescription medications to $2,000 annually.
The Medicare Part D “donut hole” is going away and will be replaced by a three-phase design.
A new monthly payment plan lets you spread your medication costs over the calendar year.
There are big changes to Medicare in 2025. For the first time, Medicare has gotten rid of the costly “donut hole” coverage gap. There will be a limit on how much you’ll pay out of pocket for prescription medications. Plus, a new payment option will help spread medication costs throughout the year.
These changes are part of the Inflation Reduction Act. They represent some of the most significant updates to Medicare Part D since it began in 2006. Medicare is also rolling out a few other important changes in 2025. Here’s a look at what’s changing and how it might affect you.
What changes can you expect for Medicare in 2025?
Three big changes could make prescription medications more affordable and easier to manage:
Prescription Savings Are Just the Beginning
See what other benefits you qualify for—from cashback cards to cheaper insurance.
1. Annual limit of $2,000 for out-of-pocket prescription medication costs
Medicare Part D now has a $2,000 annual cap on out-of-pocket costs for prescription medications. Once you spend $2,000, you won’t owe anything else for covered prescription medications.
For example, if you take Ozempic (semaglutide) for Type 2 diabetes, you might spend thousands of dollars out of pocket each year. But in 2025, your total cost for Ozempic and all other covered medications won’t go over $2,000.
“This will significantly reduce the amount of annual spending by seniors each year on prescription medications,” Dan Hardle, the CEO of Medicare Advocates, told GoodRx Health. This cap applies to stand-alone Part D plans and Medicare Advantage (MA) plans with prescription coverage. And if you have a Medicare Part D plan with supplemental benefits, those will count toward the $2,000 limit too. This means you could reach the cap faster.
But the number of Part D plans available in 2025 decreased by about 35% from 2024. “This means 2025 will have the fewest Part D plans available since 2006. Some experts attribute this to the $2,000 cap. The limit increases insurers’ financial responsibility, Hardle said.
Despite this reduction, several Part D plans are available. Depending on where you live, you’ll have 12 to 16 Part D plans to choose from. That’s in addition to Medicare Advantage plans with prescription medication coverage.
2. Part D donut hole will disappear
As of January 1, 2025, Medicare Part D no longer has the donut hole. The donut hole was a coverage gap. It left enrollees paying a larger share of their prescription medication costs.
Got Medicare Part D? Find out if you qualify for these money-saving programs that work alongside your Medicare coverage.
Struggling with Medicare Part D costs? Medicare’s Extra Help program could lower your costs if you meet income and resource requirements.
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In 2024, after you and your plan spent $5,030 combined on medications, you entered the donut hole. There, you had to pay 25% of your medication costs until your out-of-pocket spending reached $8,000. Then you entered catastrophic coverage. At that point, you didn’t pay anything out of pocket for medications.
Starting in 2025, Medicare Part D coverage will be streamlined into three phases:
Deductible: You’ll pay for prescription medications until you reach your plan’s deductible. The maximum deductible is $590, but some plans might have a lower deductible or none.
Initial coverage: After meeting your deductible, you will pay a portion of your medication costs through copays or coinsurance. You’ll pay these until you reach the $2,000 out-of-pocket limit.
Catastrophic coverage: Once you’ve spent $2,000, you won’t pay anything for your covered prescription medications for the rest of the year.
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A new Manufacturer Discount Program will also help lower medication costs. This program replaces the Coverage Gap Discount Program.
Under the Manufacturer Discount Program, pharmaceutical companies provide discounts on brand-name prescription medications during the initial coverage and catastrophic phases. But these manufacturer discounts won’t count toward your $2,000 out-of-pocket cap.
3. Monthly payment option for out-of-pocket prescription costs
Another addition to the changes above is the Medicare Prescription Payment Plan. This optional program lets you pay for your medications through monthly installments. That way, Medicare beneficiaries are not responsible for large sums all at once, Hardle said.
Here’s how it works:
When you pick up your prescriptions, you won’t pay your pharmacy. Instead, you’ll get a monthly bill from your insurer.
This bill will spread your medication costs evenly throughout the calendar year.
If you add more prescriptions later, your monthly bill might increase.
Your monthly payment depends on when you start the plan and your total medication costs for the year.
Let’s say you have $500 in prescription medication costs in January. Instead of paying the full $500 at once, the payment plan spreads it out over 12 months. You’d pay about $42 per month for the rest of the year.
Important things to know about this change:
This payment option is free.
Enrollment is not automatic (you must sign up for it by contacting your insurer).
It’s available with all Medicare prescription plans.
You can start or stop at any time.
Your monthly payments might change throughout the year.
You’ll never pay more than $2,000 total for the year (the new out-of-pocket limit).
You still need to pay your monthly plan premium separately if you have one.
Other Medicare changes in 2025
Medicare has several other important changes in 2025 beyond the prescription medication benefits. Here’s what you need to know:
More access to low-cost biosimilars
Medicare Part D plans have more flexibility to offer biosimilars. These are lower-cost versions of certain medications. Previously, plans faced a lengthy approval process when switching to biosimilars. And they could apply the change to new users only. This meant many people couldn’t access these lower-cost options right away.
Here’s what has changed:
Plans can switch more quickly to a lower-cost biosimilar medication from the original medication.
You’ll receive a 30-day notice before the change happens.
The switch applies to everyone taking the medication, not just new users.
For certain biosimilars, called interchangeable, plans can make the change even faster.
Increased coverage for mental health care
Medicare is expanding mental health coverage in 2025. It now includes marriage and family therapists, mental health counselors, and addiction medicine specialists. Previously, these providers couldn’t bill Medicare for their services. This limited access to mental health care for many Medicare beneficiaries. With these changes, there will be more mental health professionals to choose from.
Also, new billing codes are being introduced for mental health treatment, Hardle said. This means professionals can offer digital mental health that can be used alongside traditional behavioral health services. You’ll have more covered treatment options, including technology and apps. This helps make care more accessible.
If you have an MA plan, there are more changes to ensure you can access these new mental health services. Your MA plan is required to:
Have enough mental health providers in their networks
Make sure providers are located within a reasonable distance from where you live
Offer telehealth options for mental health services
Expanded support for people with dementia
The Guiding an Improved Dementia Experience (GUIDE) program launched in July 2024. It is expanding in 2025. Under GUIDE, Medicare pays healthcare organizations to provide comprehensive care for people with dementia. This includes coordinating medical appointments, education, family support, and respite services for caregivers.
Starting in July 2025, nearly 300 new healthcare organizations will join the program. This will make these services available to more Medicare beneficiaries.
Midyear notice about your unused benefits
Medicare Advantage plans will send members a personalized midyear notice about unused benefits, such as dental, vision, and fitness programs. This notice, required by the Centers for Medicare & Medicaid Services, will be sent between June 30 and July 31. They will help members make the most of their plans.
Here’s what you can expect:
A list of benefits you haven’t used in the first 6 months of the year
Details on what each benefit includes, potential costs, and how to use them
A phone number to call if you need help using your benefits
Will Medicare premiums increase in 2025?
Medicare’s updates will bring a few changes to your premiums. Let’s look at what you might pay for Medicare coverage in 2025:
Medicare Part A (hospital insurance): Most enrollees don’t pay a premium. The 2025 Medicare Part A premium is $285 per month for those with 30 to 40 quarters of coverage or a qualifying spouse. It is $518 per month for those with less than 30 quarters of coverage.
Medicare Part B (medical insurance): The standard Medicare Part B premium will be $185 per month, an increase of $10.30 from 2024.
Medicare Part C (Medicare Advantage): Most MA plans that include prescription medication coverage will charge no premium (other than your Part B premium). For plans that charge a premium, the average cost will be around $17 per month, a slight decrease from $18.23 in 2024.
Medicare Part D (prescription medication coverage): The base Part D premium (the starting cost for these plans) increased slightly in 2025. But the average Medicare Part D premium is expected to drop from $53.95 in 2024 to $46.50 in 2025. For stand-alone plans (not part of an MA plan), the average premium will be around $40, down $1.63 from 2024. Actual premiums may vary based on your plan and location.
The bottom line
Starting in 2025, Medicare Part D has a $2,000 annual cap on out-of-pocket medication costs. The “donut hole” coverage gap is gone, making Part D coverage simpler. You also have a new option to pay for your medications in monthly installments. Part D premiums have decreased for 2025, though other Medicare premiums have increased slightly. Many Medicare Advantage plans continue to have no additional premium.
Medicare is adding mental health providers, expanding dementia care, and making sure you know about your unused Medicare Advantage benefits.
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References
Centers for Medicare & Medicaid Services. (n.d.). Guiding an Improved Dementia Experience (GUIDE) model overview factsheet.
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Centers for Medicare & Medicaid Services. (2024). Contract year 2025 Medicare Advantage and Part D final rule (CMS-4205-F).
Centers for Medicare & Medicaid Services. (2024). Medicare Advantage and Medicare prescription drug programs to remain stable as CMS implements improvements to the programs in 2025.
Centers for Medicare & Medicaid Services. (2024). 2025 Medicare Parts A & B premiums and deductibles.
Cubanski, J., et al. (2024). Medicare Part D in 2025: A first look at prescription drug plan availability, premiums, and cost sharing. KFF.
Duran, V. S., et al. (2024). Revised Medicare Part D Manufacturer Discount Program final guidance. Centers for Medicare & Medicaid Services.
Fowler, L., et al. (2024). Guiding an improved dementia experience by clearing the path for comprehensive, high-quality dementia care. Centers for Medicare & Medicaid Services.
Freed, M., et al. (2024). Medicare Advantage 2025 spotlight: A first look at plan premiums and benefits. KFF.
Medicare Advocates. (n.d.). Let us help you find your Medicare plan!
Medicare.gov. (n.d.). How much does Medicare drug coverage cost? Centers for Medicare & Medicaid Services.
Medicare.gov. (2024). Manage your monthly drug costs. Centers for Medicare & Medicaid Services.
Medicare Learning Network. (2024). Medicare physician fee schedule final rule summary: CY 2025. Centers for Medicare & Medicaid Services.
