Three Changes to Medicare on the Horizon for 2025

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With a new year comes new rules for different programs, including Medicare. In 2025, the program will be seeing a few changes, many that attempt to decrease costs for recipients.

Medicare will cost you more in 2025 than it did in 2024. Medicare Part A, Medicare Part B and Part D premiums and deductibles, have gone up. So have the income related monthly adjustment amounts (IRMAA) for Medicare Parts B and D. However, other costs will be going down for recipients, including on prescriptions, and more protections are coming.

Here are three ways Medicare will change in 2025:

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1. New annual cap on out-of-pocket prescription costs

Beginning in 2025, people with Part D plans won’t have to pay more than $2,000 in out-of-pocket costs, thanks to a provision in the Inflation Reduction Act of 2022. The $2,000 cap will be indexed to the growth in per capita Part D costs, so it may rise each year after 2025. Part D enrollees will also have the option of spreading out their out-of-pocket costs over the year rather than face high out-of-pocket costs in any given month.

This new rule applies only to medications covered by your Part D plan and does not apply to out-of-pocket spending on Medicare Part B drugs. Part B drugs are usually vaccinations, injections a doctor administers, and some outpatient prescription drugs.

This change to Medicare prescription drug coverage may cause problems for some people who delay enrolling in Medicare because they are covered by employer health insurance. See Medicare Upgrades Could Disqualify Your Private Plan to find out more about how this new $2,000 cap will impact the credibility of your employer-provided prescription drug coverage.

One additional point to note: The Biden administration negotiated prices of 10 drugs with Medicare in 2024. However, those prices won't go into effect until January 1, 2026.

2. A new midyear Medicare Advantage notification

A picture of stethoscope with fake capsule, medicare advantage word, tablet, money shield and heart.

Medicare Advantage plans often tout the coverage that they provide and traditional Medicare doesn't — dental, vision, hearing and fitness benefits. Most Medicare Advantage plans offer at least one supplemental benefit, and the median number provided is 23, according to CMS.

Three in 10 beneficiaries in Medicare Advantage plans said they did not use any of their plan’s supplemental benefits in the past year, according to a study by The Commonwealth Fund. The study also found evidence that Medicare Advantage plans were more likely to burden patients with the need to obtain prior approvals, so check plan requirements carefully.

Starting in 2025, Medicare Advantage plans will be required to send policyholders a personalized “Mid-Year Enrollee Notification of Unused Supplemental Benefits” in July. It will list all supplemental benefits the person hasn’t used, the scope and out-of-pocket cost for claiming each one, instructions on how to access the benefits and a customer service number to call for more information.

The intent of this is for people to make sure they're making use of those benefits. It's part of what you can get, so you should take advantage of it, and this will serve as a good reminder.

3. Crackdown on agents and brokers who sell 3 types of Medicare policies

The Centers for Medicare & Medicaid Services (CMS) hopes to end sales incentives in 2025 for Medicare Advantage and Part D plans. Salespeople sometimes get incentives, such as hefty bonuses, when they enroll Medicare beneficiaries into private insurers’ Medicare Advantage plans, Medigap or Part D prescription drug plans.

The coming rule change is meant to disincentivize steering people to insurance plans to earn perks and not serve the best interests of Medicare beneficiaries.

The new rule prohibits offering incentives to salespeople to enroll people and limits compensation to fixed caps. The new rule also says it will stop brokers and agents from receiving “administrative fees” above Medicare’s fixed compensation caps. In most states, that cap has been $611 for new Medicare Advantage signups and $306 for renewals. Part D plans have had lower caps: $100 for initial enrollment and $50 for renewals.

In 2025, the government will increase the compensation for initial enrollments in Medicare Advantage and Part D plans by $100, which much higher than the proposed increase of $31. CMS believes this increase will provide agents and brokers with sufficient compensation, and eliminate the current variability in payments and improve the predictability of compensation for agents and brokers.

Donna joined Kiplinger as a personal finance writer in 2023. She spent more than a decade as the contributing editor of J.K.Lasser's Your Income Tax Guide and edited state specific legal treatises at ALM Media. She has shared her expertise as a guest on Bloomberg, CNN, Fox, NPR, CNBC and many other media outlets around the nation. She is a graduate of Brooklyn Law School and the University at Buffalo.