A Major Shift in Prescription Drug Costs
For many beneficiaries, the most impactful new Medicare rule for 2025 is the capping of out-of-pocket expenses for Part D prescription drugs, a change mandated by the Inflation Reduction Act (IRA).
The $2,000 Part D Cap
Starting January 1, 2025, individuals with a Medicare Part D plan will not pay more than $2,000 annually for their covered prescription medications. This limit covers deductibles, copayments, and coinsurance for Part D drugs. Once the $2,000 cap is reached, beneficiaries will have no further cost-sharing for the remainder of the year. This applies to those with stand-alone Part D plans and those with prescription drug coverage through a Medicare Advantage plan.
Elimination of the "Donut Hole"
The implementation of the $2,000 cap also effectively eliminates the Part D coverage gap, also known as the "donut hole". For more details on the coverage phases and a new voluntary monthly payment option for Part D costs in 2025, refer to the {Link: CMS website https://www.cms.gov/newsroom/fact-sheets/medicare-advantage-and-medicare-prescription-drug-programs-remain-stable-cms-implements-improvements} and {Link: PAN Foundation https://www.panfoundation.org/everything-you-need-to-know-about-medicare-reforms/}.
Updates to Original Medicare (Parts A & B)
Changes for 2025 also affect Original Medicare, with increased costs for both Part A (hospital insurance) and Part B (medical insurance). Information regarding the inpatient hospital deductible for 2025 and coinsurance amounts for extended stays can be found on the {Link: CMS website https://www.cms.gov/newsroom/fact-sheets/medicare-advantage-and-medicare-prescription-drug-programs-remain-stable-cms-implements-improvements}. The standard monthly premium for Part B rose to $185.00, and the annual deductible increased to $257. High-income beneficiaries continue to pay an Income-Related Monthly Adjustment Amount (IRMAA).
Expanded Coverage and Services
Medicare is expanding coverage for several key services starting in 2025, including enhanced behavioral health coverage and caregiver support. Telehealth rules are also changing after March 31, 2025, with stricter location requirements for many services.
Medicare Advantage and Medigap Adjustments
Changes also impact private Medicare plans.
Comparing 2024 and 2025 Medicare Changes
| Feature | 2024 Rule | 2025 Rule | Impact on Beneficiaries |
|---|---|---|---|
| Part D Out-of-Pocket Cap | No annual cap; catastrophic phase involved 5% coinsurance. | Capped at $2,000 annually. | Major savings for those with high prescription drug costs. |
| Medicare Prescription Payment | No monthly payment option existed. | New voluntary option to pay costs in monthly installments. | Improved budget management for high upfront drug expenses. |
| Part A Deductible | $1,632 per benefit period. | $1,676 per benefit period. | Slightly higher hospital inpatient costs. |
| Part B Standard Premium | $174.40 per month. | $185.00 per month. | Minor increase in monthly premium for most beneficiaries. |
| Part B Deductible | $240 annually. | $257 annually. | Slight increase in out-of-pocket costs before Original Medicare pays. |
Medicare Advantage (Part C)
- Stable Premiums: Average Medicare Advantage premiums are projected to decrease slightly, with many enrollees having a $0 premium.
- Modified Supplemental Benefits: The availability of supplemental benefits like dental and vision remains, though some plans may alter their frequency.
- Prior Authorization Transparency: New rules require plans to conduct annual health equity analyses of their prior authorization policies.
- Mid-Year Benefit Reminders: Plans must send notices to enrollees about unused supplemental benefits.
Medigap
- Medigap policyholders should be aware of the Original Medicare cost increases, as these plans help cover Parts A and B out-of-pocket costs.
- Medigap premiums are set by private insurers and can change annually.
Conclusion
Understanding what is the new Medicare rule for 2025 over 65 involves recognizing significant changes. The $2,000 Part D out-of-pocket cap offers substantial financial relief for those with high prescription drug costs, though this may be partially offset by increased Part A and B premiums and deductibles. Expanded coverage for mental health and caregiver support are positive developments. Given these changes, seniors should review their plans during Open Enrollment to ensure their coverage meets their needs.
Glossary of Key Terms
- CMS (Centers for Medicare & Medicaid Services): The federal agency that administers the Medicare program.
- IRA (Inflation Reduction Act): Federal legislation responsible for many of the key Medicare changes taking effect in 2025.
- Part D Doughnut Hole (Coverage Gap): A former phase of Part D coverage with higher cost-sharing; eliminated in 2025.
- IRMAA (Income-Related Monthly Adjustment Amount): Additional amounts paid on Part B and D premiums by higher-income beneficiaries.
Summary of 2025 Medicare Rule Changes
Key 2025 Medicare rule changes include a $2,000 annual cap on out-of-pocket prescription drug costs for covered medications under Part D. There is also a voluntary Prescription Payment Plan available to spread out-of-pocket Part D drug costs over the year. Part A & B costs have increased, with higher premiums and deductibles for Original Medicare. Medicare has expanded coverage for new services in areas like mental health and caregiver training. For Medicare Advantage, premiums remain generally stable, though supplemental benefits may see adjustments. Telehealth limitations are being implemented, with restricted access from home for some services after March 2025.
