Starting in 2025, all Medicare prescription plans will be simplified. This includes both Stand-Alone Prescription Plans (Part D), and Prescription Coverage that is part of a Medicare Advantage Plan (Part C with built-in drug coverage).
In summary, all Medicare Prescription Drug Plans will cap your total out-of-pocket drug costs at $2000 for the calendar year. Very important to remember:
This will ONLY apply to drugs that are covered by your Part D plan AND filled at an in-network pharmacy. If you are not sure, you should contact your plan and look at the formulary (list of covered drugs) and list of network pharmacies for your specific plan.
The other big change is that all drug plans must now give you the option to spread your annual drug costs evenly throughout the year. This is a brand-new program, and you should consult directly with your plan to see how you can sign up for this.
One more thing to remember is that any drugs you take that are administered at your doctor’s office are usually covered under Medicare Part B (Medical Coverage) and NOT through your Medicare Prescription Drug Plan.
Here’s a little more detail. In 2024, drug plans had 4 coverage levels, or phases:
1 – Deductible Phase.
Each drug plan could impose an annual deductible on drugs not to exceed $545. Generally, you’d be responsible for 100% of the costs of prescriptions until this deductible was satisfied.
2 – Initial Coverage Phase.
After the deductible was met, you would be responsible for the copays that your plan provided for the prescriptions you filled through your plan.
3 – Coverage Gap Phase.
If the total retail cost of your prescriptions exceeded $5,030, you would now be in the coverage gap (also known as the “donut hole”). You would now pay 25% of the retail cost of every drug you filled through your plan for the rest of the year. Even though you will be paying 25%, Medicare keeps track of the True Out-of-Pocket (Troop) costs, which are calculated at 95% of the retail cost, even though you are actually paying 25%.
4 – Catastrophic Phase.
If your True Out-of-Pocket Costs (Troop) reached $8000, you would no longer pay anything for your prescriptions for the rest of the year.
In 2025, there will only be three phases:
1 – Deductible Phase (Increases from $545 to $590).
Each drug plan could impose an annual deductible on drugs not to exceed $590. Generally, you’d be responsible for 100% of the costs of prescriptions until this deductible was satisfied.
2 – Initial Coverage Phase.
After the deductible was met, you would be responsible for the copays that your plan provided for the prescriptions you filled through your plan. These will generally equate to about 25% of the retail cost.
3 – Catastrophic Phase.
The Coverage Gap Phase has been ELIMINATED. Once you have paid $2000 in annual drug costs, you will pay $0 for your medications for the rest of the calendar year.
As with any new changes, you may have more questions about how this might affect you.
Each year, your plan must send you an Annual Notice of Change letter. This will outline any changes to your plan for 2025, including new premiums, changes in deductibles and copays, and any drugs that were covered last year that might not be covered in 2025.
Every plan has a member services line that you can contact to find out more specifics on how this might affect you. Simply check the back of your card.
Although it’s definitely too early to know exactly how these changes will be administered, we do believe that:
Because all drug plans must now cap your drug costs at $2000 annually, it may make less sense to purchase a drug plan with a high premium compared to one with a low premium. The key here will be making sure that your prescriptions are covered by your plan. Also, pay attention to the deductible. Plans with higher deductibles can mean that you will pay more at the beginning of the year for your drugs than later in the year. But, with the new rule that you can now spread your drug costs out over the entire year, this might make any deductible easier to manage. To take advantage of this payment plan, you must contact your plan directly.
