Get Ready for Big 2025 Medicare Part D Changes

The focus in the media lately has been on the $2,000 out-of-pocket (OOP) cost cap for seniors. If you’ve been paying an exorbitant amount for your Rx’s, that may well change for the good in 2025.

But if you haven’t been paying a lot for your Part D plan and Rx’s, get ready to pay more. Nothing’s free in Medicare-land. If costs for the drugs are going down, you can bet premiums will be up.

Things are in limbo right now, but we know 2025 Medicare Part D changes are just weeks away. Read on for important background information…

Part D plans have been changing for the last few years

The Inflation Reduction Act was ushered in by Congress in 2022. A big chunk of the bill included massive changes in costs of prescription drugs for those in Medicare Part D plans. You should expect significant 2025 Medicare Part D changes. They are coming on the heels of other changes over the past few years.

These are the most significant changes to Medicare we’ve seen since Part D plans got their start in 2006. Starting in 2022, you may have seen the rolling changes that have been implemented, including:

• All covered Insulin products have been capped at $35 per month.
• The catastrophic phase of drug costs was eliminated. Seniors are no longer responsible for the 5% co-share once they reached that phase.
• Medicare and the federal government can finally get a seat at the table with the drug manufacturers. It’s high time the government can negotiate prices for the drugs they pay for.
• Recommended vaccines for seniors will now be offered with no out-of-pocket costs for those with a Part D plan.

These changes are monumental, especially in a time of a dysfunctional Congress.

2025 Medicare Part D changes usher in the $2,000 cap

I would argue that of all the 2025 Medicare Part D changes, the most sweeping one is the $2,000 price cap. It starts right away this coming January. The insures who offer these plans—standalone Part D and those in Part C plans—must cap consumer drug spending. The law starts at a $2,000 per person per year cap. And that limit will be indexed for inflation in future years.

There’s a lot of misunderstanding beneath the headlines. While overall this is very good news for several million seniors, there are a lot of devils in the details.

When most people hear about the $2,000 cap on Part D plans, they think it’s an all-in cost for the year. That couldn’t be further from reality.

The biggest piece missing from the cost pie is the monthly premium. Some plans may continue to carry a $0 monthly premium, but most standalone Part D plans charge a monthly premium. I expect to see a significant increase in premiums in 2025. Even if you only take one or two generic prescriptions.

Medicare Part C plans that wrap Part D into the contract may not charge a separate drug premium. But some do. It’s up to each individual to check how the pricing will work in their Part C plan. And check for both medical costs and prices of drugs.

Are there other Part D costs to consider?

Why, yes there are. Good of you to ask.

Another piece of the Part D cost pie is that individuals initially pay retail costs for their Rx’s in the “deductible” phase. That amount has increased from $545 in 2024 to $590 in 2025. You don’t necessarily pay the full $590. You’ll just pay a higher retail price for each Rx until you’ve paid $590 out of your own pocket.

Once you’ve paid the first $590, now insurance will kick in. For most Rx’s, you’ll pay 25% of the retail cost and the Part D plan (or others) will pay 75%.

You might think once you reach $2,000 total OOP, you’re done for the year.

But not so fast…

Could I pay more than $2,000 for my prescriptions?

Yes, you can. And you will if you aren’t shopping for your Part D plan later this fall during the Open Enrollment Period. That’s the short window between October 15 and December 7.

There’s an important word left out of most conversations about the new $2,000 cap. And that word is “covered.” The only Rx’s that will be eligible for the $2,000 OOP cap are those specifically covered on the Part D plan’s formulary. If your exact prescription is not on the list of covered drugs at a particular insurer, you’ll pay the full retail price!

Up to now, most of the common drugs have been covered on most of the common Part D plans. But the suspicion is that will not be the case going forward.

What about my $35 Insulin?

Well, your $35 per month insulin costs will likely come into play as well. At $35 per month per covered Insulin, your looking at $420 per year. Per Insulin you take.

There are some 30 or more Insulins. Both brand name and generic. Some are fast-acting, others kick in for a few hours, while others are extended. Depending on the specific Rx’s your doctor prescribes for you, you’d want a Part D plan that covers each. You’ve probably already done that.

But with anticipated 2025 Medicare Part D changes, your current plan may no longer cover at least one of your Insulins. And you could be paying $3,000 or $4,000 or more for the year just for that one outlier Rx. Plus the monthly premium, plus the cost of your other Insulins and any other drugs.

It’s going to be a challenging year for many older Americans on Part D plans. The Part D plan formularies—list of drugs they cover with insurance—are likely to change a lot. Please plan to check and recheck your options.

And don’t forget to check the pharmacies!

You first need to know if all your prescriptions are actually covered on a part D plan. Then you need to know about the pharmacies. Is the current pharmacy you are using a preferred/in-network pharmacy? Or is it just “in-network?” Even worse, is it OON (out-of-network)?

Deals between drug manufacturers, Part D insurance companies, and each pharmacy ultimately determine costs. If you aren’t paying attention to all the players, you stand to pay more. A lot more!

Keep in mind the two biggest pharmacies, CVS and Walgreens, are fierce competitors. Plus, Aetna is owned by CVS. So you can expect to see that CVS will be a preferred pharmacy under some plans while Walgreens is OON. And vice versa with other Part D plans.

Again, it will be up to you to figure this out before it’s too late.

Should I just skip getting a Part D plan?

Recently, I’ve been getting this question about Part D plans. Especially if someone doesn’t take any prescription drugs. Why should they pay monthly premiums for something they won’t be using?

Please do not skip enrolling in a Part D if you are just joining Medicare. And definitely do not let a Part D plan lapse if you’re already in Medicare. None of us has any idea when we’ll be diagnosed with a  health issue that requires an expensive medication.

One person I recently talked to was diagnosed with some form of cancer. Without a Part D plan, the drug was listed at $18,000 per month.

Even if you never use a Part D plan, and are paying $25/month in premiums, after 30 years, that’s only $9,000. In total. Versus the risk of needing an $18,000 per month drug.

Know the Part D law

There are lots of devils in the Medicare law. One is: if you don’t enroll in a Part D plan when first eligible, you’ve signed up for a permanent penalty. Another is: if you cancel a Part D plan during retirement and later want to get back in, you can. With a penalty.

If you go without Part D insurance for more than 63 days, you’ll pay a permanent penalty. If you have creditable drug coverage from an employer plan, you can delay entering Part D. But once that coverage ends, you’ll only have 60 days to get into a plan. Penalties start up on day 63.

You also can’t just enter a Part D plan any time you want. You can only enter or reenter during the fall Open Enrollment Period. October 15 through December 7.

The penalty is 1% per month for the months you didn’t have Part D. The penalty continues for your entire retirement. You pay the penalty amount to your Part D insurer along with your regular monthly premium.

But a 1% penalty never seems like much of a stick. “Eh. One percent per month. How much can that really be?”

If you’re late to the Part D party, you’ll pay a permanent penalty

The 1% penalty is calculated on a specific premium called the “base beneficiary premium.” It’s an average cost based on all Part D insurer’s calculations. The base beneficiary premium is $36.78 for 2025.

The penalty isn’t much if you delayed joining a Part D plan for one year. You’ll pay the Part D insurer’s plan premium plus a 12% penalty. In 2025, that’ll cost you $4.41 per month extra ($36.78 x .12). Or $53 extra for the year.

That doesn’t sound horrible. But remember, we’re talking about a permanent penalty. And the base beneficiary premium increases each year. So, you’ll be penalized for say 25 years of retirement. You’ll pay penalties approximately in these amounts:

• $56 in year two
• $89 in year 10
• $160 in year 20

I’ve estimated you’ll spend nearly $3,000 in penalties during your retirement. For a one-year delay into a Part D plan. But if you wait longer:

• Delay 3 years—pay about $10,000 in penalties.
• Delay 5 years—pay somewhere around $18,300 in penalties.

Moral of the story: You don’t have to like how Part D plans work. You just need to have yours in place every year you’re in Medicare.

An interesting twist to the story

There is an interesting twist to consider. There’s no rule that says you must use your Part D plan. You just have to have one.

Sometimes, you’ll find your drugs are cheaper by not using your Part D plan.

You can use discount drug programs such as GoodRx, Singlecare, or AARP’s discount drug card. Or you might try new disrupters like Amazon, Costco, and Mark Cuban’s Cost Plus Drug Company. Other new options will pop up over time.

You can either use your Part D plan to order and pay for your Rx’s. Or use the discount cards at a pharmacy. But not both for the same prescription at the same time. It will cost you some time and calls to your doctor to change pharmacies frequently. But if you want to know how you might save money—at least in the next year—shop around.

Talk to the pharmacist to see what they might suggest. And check with your local Council on Aging or Senior Center for cost savings ideas in your area.

2025 Medicare Part D changes coming soon

Overall, the changes in the Inflation Reduction Act are positive for many seniors. But be prepared for higher premiums as one of the 2025 Medicare Part D changes.

Also, look carefully at the costs of each of your prescriptions at various pharmacies. Are they still covered drugs on the Part D formulary? Is your specific Insulin still $35 per month?

It is up to each person to reshop their Part D or MAPD plans right away when Open Enrollment begins this October 15^th. The best tool to use is the free one on Medicare.gov. It’s called the “find plans” tool.

Make sure to take a look at all your Medicare costs for 2025. You’ll find a handy worksheet and more cost information in this post.

It will be well worth your while this coming year. There are too many changes that might be “gotcha’s.”