Medicare Changes in 2025
There’s good news and some not-so-good news about the changes in Medicare plans next year. This is why Medicare policy experts urge Medicare beneficiaries to read the Annual Notice of Change their insurers sent so they will not be caught off guard when changes take effect on Jan. 1, 2025.
By reviewing the document now, beneficiaries will be able to compare their current coverage with other plans and switch, if they want, during Medicare Open Enrollment which ends Dec. 7, 2024.
The most talked-about change comes in the Medicare Part D prescription drug plan which may bring some financial relief to people who take medication for chronic health conditions. Thanks to the Inflation Reduction Act (IRA), the out-of-pocket spending for prescription drug coverage is capped at $2,000.
“It’s the first time in the history of the Medicare program that people have a cap on how much they could have to pay out of pocket,” Dr. Meena Seshamani, the director of the federal Center for Medicare, told AARP. “And such a significant change means that in open enrollment, it is so important to shop. Because with such big changes, there very well could be a plan that better suits your health and financial needs.”
The $2,000 cap includes deductibles, copayments and coinsurance for covered drugs. The cap, however, does not apply to premiums, to drugs a Medicare Advantage plan does not cover, or to Medicare Part B drugs, such as injections, vaccines, or drugs given in a doctor’s office or hospital outpatient setting.
Beneficiaries may welcome the out-of-pocket cap, but insurance companies are looking at it differently because the IRA requires insurers and drug manufacturers to pay more costs for Medicare Part D in 2025.
Private insurers offer Medicare Part C, better known as Medicare Advantage, a plan that can include dental, vision, transportation to doctor visits, gym memberships, and other health-related benefits that original Medicare does not offer.
In response to the additional financial responsibility, experts say insurers that offer Medicare Advantage might raise deductibles and copays, eliminate some extra benefits, no longer cover certain medications or increase prices of ones it will.
“I have been very, very concerned about what the $2,000 cap was going to do to Part D premiums,” Danielle Roberts, author of 10 Costly Medicare Mistakes You Can’t Afford to Make and founding partner of Boomer Benefits, which sells Medicare policies, told Fortune Well.
Roberts said she’s still concerned about premium increases, but “I feel a little better after the stabilization program announcement.”
To prevent a sharp hike in premiums, The Centers for Medicare and Medicaid Services (CMS) announced a premium stabilization program that provides health insurers with a special subsidy for 2025.
“It should take what might have been a 40%, 50%, or higher premium increase down to probably 25%,” eHealth CEO Fran Soistman told Fortune Well. “It’s still going to be a bit of sticker shock when some people see how their premiums changed.”
The base beneficiary premium for Medicare Part D in 2025 is $36.78, a six percent increase from 2024. Actual premiums will vary based on the plan, a beneficiary’s location, and other factors.
A premium increase or a slight change in benefits does not mean beneficiaries should switch plans, according to Soistman.
“If there’s a modest benefit decrease or premium increase, but they’re satisfied with what the carrier is providing, people shouldn’t make a change,” Soistman told Fortune Well.
However, Soistman said what might change a beneficiary’s mind about switching is if an insurer eliminates coverage of a medication the individual takes or the individual’s doctor or hospital will no longer be in the network.
During open enrollment, beneficiaries can switch from their current Part D plan to another Part D plan, from their current Medicare Advantage plan to another Medicare Advantage plan, from Medicare Advantage to original Medicare, or from original Medicare to a Medicare Advantage plan.
Because of the different Medicare changes, experts warn Medicare Advantage members to resist the temptation to ignore the Annual Notice of Change sent by their health insurers.
“So often, a person who is quite happy with their plan and doesn’t bother to look at their Annual Notice of Change then gets a nasty surprise in January” when the plan’s new costs and coverage begin, Roberts told Fortune Well.
Besides the $2,000 cap, other Medicare changes for 2025 include:
1. The disappearance of the “donut hole”
The upcoming change will eliminate the coverage gap, a phase of Medicare Part D that is also known as the “donut hole.” The coverage gap occurs when prescription drug plans pay less for drugs while beneficiaries pay out-of-pocket costs up to their annual limit. Once beneficiaries have paid up to their yearly limit, the coverage gap ends and the prescription drug plan helps to pay for all covered drugs again.
Currently, most Part D plans have deductibles up to $545. Next year, plans can have a deductible of up to $590. After that, beneficiaries pay copayments for their medication until they reach the $2,000 out-of-pocket limit.
2. Weight loss drug coverage for certain conditions
Medicare does not cover drugs only for weight loss purposes. However, it will cover medication that the Food and Drug Administration approves for a medical use other than weight loss. For example, Ozempic and Mounjaro, two popular weight loss drugs, are covered if they are prescribed to treat type 2 diabetes. Wegovy, another highly popular weight loss drug, is covered for people with cardiovascular disease who are overweight.
3. Program expansion for dementia patients and their caregivers
On July 1, 2024, CMS launched The Guiding an Improved Dementia Experience (GUIDE), a voluntary, nationwide program designed to improve the quality of life for people with dementia and their caregivers. GUIDE began with 96 CMS-selected academic medical centers, hospitals, small and large group practices and community-based organizations that already provide programs for dementia patients. CMS chose 294 more organizations to join in July 2025.
“We’re very excited about this,” Janet LeClair told AARP. LeClair is CEO of Memory & Movement Charlotte (North Carolina), a nonprofit medical practice that has focused on dementia patients for 11 years. “The caregiver is really the pivotal person ensuring the quality of life of the patients.”
Participants must be enrolled in original Medicare, have a dementia diagnosis, and cannot be in hospice or a nursing home.
4. More Medicare coverage for behavioral health services
Medical doctors won’t be the only ones to bill Medicare for their services. Beginning in 2025, licensed mental health counselors, addiction counselors, marriage and family therapists, and community mental health centers can enroll as Medicare providers. Studies have found that more adults have been seeking mental health treatment in recent years, including people 65 and older.
“We’ve had such tremendous excitement and interest with tens of thousands of clinicians enrolling in the Medicare program, which will make a big difference for access to care,” Dr. Seshamani told AARP.
Source Links:
https://www.aarp.org/health/medicare-insurance/info-2024/medicare-changes-coming-in-2025.html?cmp=EMC-DSM-NLC-OTH-WBLTR-1532702-1950316-8586597-NA-08312024-Webletter-MS1-NA-NA-CLKBT-Medicare&encparam=FrpXHVVpy6GDKpHCoVBzxSjUd9bWzTGWcY42Dxffhwc=
https://fortune.com/well/article/medicare-annual-notice-of-change/
https://www.cms.gov/inflation-reduction-act-and-medicare/part-d-improvements
