3 Changes to Medicare Part D in 2025 Due to the Inflation Reduction Act

There are big changes coming to Medicare Part D next year that are part of the Inflation Reduction Act. Keep reading to learn about them and how they could impact coverage and costs for some enrollees.

Related: What’s Medicare Part D?

3 Changes Coming to Medicare Part D in 2025 Due to the Inflation Reduction Act

1. Out-of-Pocket Cost Cap

The Medicare Part D cost cap is a beneficiary’s maximum annual out-of-pocket spending on covered prescription drugs. Once their cost cap is reached, they will not have to pay any additional costs for their covered medications for the rest of the year.

In 2024, most people contribute about $3,300 to $3,800 toward their annual Medicare Part D spending limit.

However, in 2025, people with  Medicare Part D will have a reduced annual spending limit of $2,000. In following years, annual caps will be based on inflation.

The reduced out-of-pocket cost cap could help people who have high drug costs save around $1,300.

Please keep in mind that the annual cap doesn’t apply to out-of-pocket costs of Medicare Part B drugs. These are drugs that are administered by a healthcare provider in an outpatient setting, such as some cancer drugs and injectable drugs.

2. Coverage Gap Phase Elimination

Also known as the Medicare “donut hole,” the Medicare coverage gap is a stage in Medicare Part D coverage where there is a temporary limit on what the plan will cover for prescription drugs. During this stage, beneficiaries pay a higher percentage of the cost of their drugs.

In years past, during the coverage gap phase, Part D enrollees faced 100% of their total drug costs, and in 2024, enrollees face 25% of costs for brand-name and generic drugs.

In 2025, the coverage gap phase will be eliminated, and Part D enrollees will no longer face changes in their cost sharing after the initial coverage period. There will be just three coverage phases:

1. Deductible
2. Initial coverage period
3. Zero cost phase after the out-of-pocket cap is reached

3. Medicare Prescription Payment Plan

Medicare Part D enrollees are used to paying for their prescriptions in full at the point of sale at the pharmacy.

However, beginning next year, all enrollees will have the option to instead pay out-of-pocket prescription drug costs in monthly installments, with a cap on monthly spending. Members who opt in to the program will pay $0 at the pharmacy and instead will be sent monthly bills.

With prescription drug costs that are evenly distributed throughout the year, this change may help retirees better manage their budgets.

Related: Saving Money With Medicare’s Extra Help Prescription Program

Some Medicare Part D Enrollees Could Experience Increased Costs and Coverage Challenges

The three changes to Medicare Part D described above will provide significant savings and advantages for seniors who have high drug costs. However, the changes could also result in increased costs for other Medicare Part D enrollees.

That’s because insurance companies will take on more expenses and could make changes to manage their increased costs. Here’s how this could affect Part D members:

• Increased Medicare Part D premiums (what enrollees pay each month for their Part D coverage)
• Increased drug deductibles (what enrollees must pay before their Part D plan starts covering their drug costs)
• More use of coinsurance (the percentage of drug costs paid by members) and/or higher copays (fixed amounts members pay for prescriptions)
• Narrower drug formularies and more step therapy or prior authorization (restrictions on which medications plans cover)
• Push to increase generic drug utilization

Want more? Check out our blog, Budgeting for Medicare Costs: 6 Tips to Help

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