Big changes are coming to Medicare in 2025, and they could make a big difference in your prescription drug costs.

Thanks to the Inflation Reduction Act, Medicare beneficiaries will see the most significant updates to the program’s drug coverage since it was first introduced in 2006.

These updates are seen as a big win for many beneficiaries, especially those taking expensive medications, but there are some important details and potential costs to consider.

4 Big Medicare Changes for 2025

Medicare open enrollment runs from October 15th to December 7th. During this annual event, people with Medicare can review plans and make changes to their Medicare coverage, which will take effect on January 1.

If you’re one of the more than 66 million people enrolled in Medicare, it’s important to understand upcoming program changes so you can make informed decisions.

With Medicare open enrollment well underway, here’s everything you need to know.

1. $2,000 annual drug withdrawal

The Inflation Reduction Act, signed into law in 2022, green-lighted significant changes to the Medicare program. These measures are rolling out over time, with the latest provision coming into effect next year.

Beginning in 2025, out-of-pocket drug spending will be capped at $2,000 per year and the prescription drug “donut hole” will be eliminated.

Here’s how the new system will work:

You pay a deductible of $590 (up from $545 in 2024). Once you have reached the deductible, you pay 25 percent of your drug costs in the initial coverage phase until your expenditure reaches $2,000. When you reach this limit, you’ll enter what’s called catastrophic coverage and pay no additional costs for prescription drugs.

This provision is expected to save Medicare enrollees approximately $7.4 billion annually, according to the Centers for Medicare & Medicaid Services (CMS). That translates to an average savings of nearly $400 per person for over 18.7 million beneficiaries in 2025, or about 36 percent of total Part D enrollment.

2. Some Part D plan premiums may increase – but the average cost is going down

While some Medicare beneficiaries will save money on healthcare costs thanks to the new $2,000 cap, especially those taking expensive brand-name drugs, others could see their premiums rise.

Before we dive into the details, here’s a quick rundown of how Medicare enrollees get prescription drugs.

The Part D marketplace has two types of plans, both of which are administered by private health insurance companies that contract with the federal government and receive funding from CMS. One is a stand-alone plan that only offers drug coverage, and the other is Medicare Advantage plans that combine drug coverage with other health services.

KFF, a nonpartisan health policy research organization, warns that some plans may adjust their premiums, formularies, payments or deductibles in response to the new $2,000 spending cap. This is partly due to increased costs for insurance companies and limited increases in government payments.

A new program, the Part D Premium Stabilization Demonstration, helps limit premium increases for Part D enrollees. This program limits monthly premium increases to $35 in 2024 and 2025.

So, at most, premiums for stand-alone drug plans could increase by $35 per month above 2024 levels. But some plans may have more modest increases, or even decreases.

That said, the average Part D premium is going down, according to CMS. The estimated average Part D beneficiary is expected to decrease by $7.45 in 2025, to $46.50 in 2025 from $53.95 in 2024.

While it’s good to understand average drug plan costs, you need to look at the premium for your specific plan — or any plan you’re considering switching to during open enrollment — to understand the true cost.

3. You can choose to pay your drug costs over time

Starting in 2025, Medicare prescription drug plans must offer enrollees the option to spread their own prescription drug costs into monthly payments throughout the year, instead of paying them all at once at the pharmacy.

If you choose to choose the Medicare Prescription Payment Plan, you will receive a bill from your Medicare Advantage or stand-alone Part D plan for your drug costs instead of paying at the pharmacy. There is no extra cost to participate in the program.

To enroll or learn more, contact your Medicare prescription provider.

4. Potentially higher Medicare Part B premium and deductible

Your Medicare Part B premium and deductible change each year. By 2025, it is likely to increase, although the change has not yet been announced. Medicare Part B covers a wide range of outpatient services, including doctor visits, outpatient surgeries, and medical equipment.

Medicare Part B premium and deductible costs are important information for beneficiaries. All Medicare enrollees pay these costs — whether they’re in a Medicare Advantage plan or Original Medicare.

Most enrollees have the Part B premium automatically deducted from their monthly Social Security check. However, it should be noted that government cost-saving programs as well as programs through Medicare Advantage plans can help reduce or eliminate the Part B premium for lower-income beneficiaries.

What to do during Medicare Open Enrollment

Medicare open enrollment takes place each year from October 15th to December 7th. During this time, you can switch from Original Medicare to a Medicare Advantage plan (or vice versa), switch between Medicare Advantage plans, or switch between Medicare Part D prescription drug plans.

You can review plans using Medicare Plan Finder tools and sign up for a new plan online or over the phone.

When evaluating Medicare costs, consider factors beyond monthly premiums. Deductibles, copays, and access to services all contribute to the total cost. Choosing the lowest premium plan may not always be the best option. Lower premiums may mean higher out-of-pocket costs or limited drug coverage.

If you are struggling to afford your Medicare costs, you may qualify for the Extra Help program. Those who are eligible typically pay up to $4.50 for a generic drug and $11.20 for a brand name drug with Extra Help.

If you are enrolled in a Medicare plan, you should have received an annual notice of change in the mail in September.

Please review this letter carefully. It will outline cost changes for your current plan as well as the drug list, also known as a formulary. Verify that your current medications are still covered and check if their tier level or your out-of-pocket costs have changed.

Take help from SHIP

Navigating Medicare can be complicated. If you need help exploring your options, a network of free, federally funded programs can help.

The State Health Insurance Assistance Program (SHIP) provides one-on-one counseling, education and support to Medicare beneficiaries and their families.

Each state has its own SHIP program, although it may go by a different name in your state, such as SHINE (Serving Health Insurance Needs of Everyone) in Florida or SHIBA (Senior Health Insurance Benefits Advisors) in Idaho.

A SHIP advisor can help you with many things, including comparing drug plans, identifying potential savings, and answering open enrollment questions – all at no charge.

You can find your SHIP by using online SHIP Regional Locator tool. Or you can call the national network hotline at 877-839-2675.

Bottom line

Medicare changes in 2025 could make a big difference in your drug costs and how you manage your payments. Take time during open enrollment to compare plans, confirm your medications are covered and check out options like the Extra Help program to reduce your costs.

Whether you are a current Medicare enrollee or approaching eligibilitynow it’s time to understand how these updates will affect your budget—and how you can make them work for you.