Substantially Increased Medicare Benefits For Prescription Drugs in 2025 – What You Need to Know

There are important new rules this year relating to prescription drug coverage which may be relevant to your Medicare plan beginning January 1, 2025. The “Open Enrollment” period this year during which eligible individuals may join, drop or change Medicare plans began on October 15, 2024 and continues through December 7, 2024.

The Inflation Reduction Act, signed into law by President Biden in August 2022, introduces significant changes to Medicare prescription drug coverage. Starting January 1, 2025 all Medicare prescription drug plans (Part D Plans) must under federal law provide a cap of $2,000 on the out-of-pocket prescription drugs costs paid by the insured participant and the Part D Plan. The $2,000 cap applies to both standalone Medicare prescription drug plans and Medicare Advantage plans with prescription drug coverage.

Note:

• If an individual does not have either of these types of plans, this “cap” will not apply.
• The amount of the insurance premiums for such a plan does not count as an out-of-pocket expense for this calculation.
• This cap is self-executing. An individual with Part D coverage will not have to pay any amount over the cap and then seek a refund.
• This cap applies only to out-of-pocket prescription drug costs. It does not apply to any other medical expenses.

The Medicare Prescription Payment Plan, available starting in 2025, also offers Part D Plan participants a new way to manage their out-of-pocket costs for drugs by spreading payments over a calendar year.  All Part D Plans offer this payment option, but it is not automatic. Part A Plan participants must opt in to take advantage.

The decision as to which Medicare Plans to enroll in can be complicated. If additional information is desired, the Medicare website is a good place to start, and agents are made available to answer questions. The State Health Insurance Assistance Program website may also be helpful, as Medicare plans can differ state to state.