Major Changes Coming to Medicare Part D

The Annual Election Period for Medicare has arrived! If you’ve overlooked this enrollment window in the past, this year it's more important than ever to pay attention. Why? Significant changes are coming to Medicare, particularly within Medicare Advantage and Part D prescription drug plans, starting in 2025. This makes it essential to carefully review your Medicare coverage during this AEP to ensure you’re prepared for these updates.

What’s Different About AEP in 2025?

The primary reason this year’s Annual Election Period stands out is due to the Inflation Reduction Act (IRA) passed in 2022. While the changes introduced by the IRA appear to be favorable for Medicare beneficiaries at first glance, the reality may be more complicated. Insurance providers are facing tough choices, which could lead to higher premiums and fewer benefits for consumers. Let’s break down what’s happening and how it might affect your coverage.

2025 Medicare Part D Changes

Since the passage of the Inflation Reduction Act, we’ve witnessed a few minor adjustments to Medicare Part D plans. However, 2025 will bring one of the most significant overhauls yet. Starting that year, all Part D prescription drug plans will be required to include an annual out-of-pocket (OOP) cap of no more than $2,000. To put this into perspective, the OOP maximum in 2024 was around $3,300—this reduction represents a dramatic shift in coverage for beneficiaries.

Once you hit this $2,000 limit in 2025, your insurance provider will be responsible for covering 60% of the remaining drug costs. The remaining 40% will be shared between the drug manufacturer and the Medicare program. This marks a notable difference from 2024, when insurance companies were only required to cover 20% of the cost beyond the out-of-pocket limit.

While these changes appear highly beneficial to Medicare beneficiaries, they pose a challenge for insurance carriers. With increased financial responsibility, these companies will be forced to recoup their additional costs in some way.

We anticipate that insurance carriers will recover this spending through several methods. The most obvious change is likely to be an increase in Part D premiums. In 2024, the average monthly premium hovered around $35. For 2025, it is expected that this average could nearly double.

Another potential cost-cutting measure involves limiting drug formularies—the list of covered medications. High-cost prescriptions currently covered by many plans may be removed from formularies starting in 2025. It’s important to note that if a medication is not on your plan’s formulary, any out-of-pocket expenses for that drug won’t count toward your annual maximum.

Additionally, carriers may introduce more stringent utilization reviews. This could include an uptick in prior authorizations, which require you to get approval from your insurance company before filling certain prescriptions. Step therapy, which mandates trying lower-cost alternatives before higher-priced drugs, might also become more common. Quantity limits on specific medications could increase as well. Unfortunately, these tactics could negatively impact beneficiaries, making access to some medications more difficult.

One positive feature Part D plans will offer in 2025 is the Medicare Prescription Payment Plan Program. This program, which you must opt into each year, will allow you to spread out the cost of your prescriptions over time, instead of paying in full at the pharmacy. Once you request this option, your pharmacy will notify the insurance carrier, who will then reach out to you to arrange a payment plan—interest-free.

These changes underscore the importance of carefully reviewing your Medicare Part D plan during this Annual Election Period to ensure you’re getting the best coverage for your needs in 2025.

2024 Medicare Advantage Changes

The significant updates to Medicare Part D are also driving major shifts within Medicare Advantage plans for 2025. Even Medicare Advantage plans that don’t include Part D prescription drug coverage are expected to undergo notable changes as insurance carriers look for ways to offset rising costs.

For Medicare Advantage Prescription Drug (MAPD) plans, the changes will likely mirror those of Part D plans. This means that beneficiaries can anticipate higher premiums in 2025. If you're currently enrolled in a $0 premium Medicare Advantage plan, it’s possible that you’ll see an increase in your premium next year.

Beyond premium hikes, Medicare Advantage plans are expected to cut back on certain benefits. This may especially affect the extra perks that go beyond what’s offered by Original Medicare, such as dental, vision, and hearing coverage, fitness programs, or transportation services. Carriers might scale back or completely remove these extras as a way to manage the increased financial burden.

One area of concern is the potential reduction or elimination of Part B giveback plans, which have been a popular option for many beneficiaries. These plans help cover some or all of your Part B premium, but with carriers looking for ways to cut costs, this giveback feature may either shrink or disappear altogether.

In addition to benefit reductions, there could also be fewer plan choices available in 2025. Some insurance companies may choose to limit their offerings or even exit the Medicare Advantage market altogether. This could result in fewer options for beneficiaries, especially in certain regions, making it more important than ever to review your plan choices carefully during the Annual Election Period.

As these changes take effect, reviewing your Medicare Advantage plan becomes crucial. What worked for you in 2024 may not offer the same value or coverage in 2025, so it’s essential to stay informed and prepared for what’s ahead.

Review Your Medicare Plans Now

As you can see, 2025 is shaping up to be a pivotal year for Medicare beneficiaries. With so many significant changes on the horizon, it’s more important than ever to stay proactive about your coverage. Schedule a meeting with your Medicare advisor, and take the time to thoroughly research the options available to you. Existing plans may undergo substantial revisions, and the differences between carriers will likely be greater than ever before.

Don’t wait—contact your Medicare advisor at Local Medicare Specialists today to secure your appointment and ensure your Medicare plan review is scheduled. Staying informed and prepared will help you navigate these upcoming changes with confidence!