The Inflation Reduction Act and Part D Changes: What Medicare members need to know

You may have seen news articles mentioning the Inflation Reduction Act (IRA) and changes to Part D prescription drug plans. The good news is that most Medicare members will benefit from the changes. In fact, you may have already seen some of the benefits from the IRA.

Keep reading to learn about the changes coming in 2025 and how these updates may even save you money.

What to know about the Inflation Reduction Act (IRA)

The IRA was signed into law in 2022. It makes Medicare stronger for current and future members by making health care more accessible, equitable, and affordable. The IRA may have already brought you some relief with the updates rolled out in 2023 and 2024, like…

• Lower insulin costs, capped at $35 a month for each covered insulin product.
• Free recommended vaccines with Medicare Part D.
• More assistance for low-income seniors under the Low-Income Subsidy (LIS) Program.
• No more costs in catastrophic coverage, including zero copayments and no coinsurance.

This all sounds pretty good, right? Here’s a look at two additional changes coming in 2025.

Out-of-pocket spending limit

Starting in 2025, your annual out-of-pocket costs for prescription drugs will be capped at $2,000. The out-of-pocket limit had previously been set at $8,000, so the rollout of this benefit in 2025 will represent a significant savings for many Medicare members. This $2,000 limit will increase slightly each year after 2025. The limit applies to medications that are covered by your Medicare Part D plan, including brand name and generic drugs and those on specialty tiers.

No more “donut hole”

The “donut hole,” or coverage gap phase, will be eliminated in 2025, simplifying the benefit structure. Even if you’ve never reached that gap before, it’s a relief to know you no longer need to worry about it. Coverage is much simpler now and can be broken down into three phases.

1. Annual deductible phase: This is when you pay 100% of copayments and coinsurance up to your deductible. In 2025, the standard annual Part D deductible will be $590. However, the deductible amount will be specific to your plan and could be lower. Also, this would only apply if your plan had a prescription deductible.
2. Initial coverage phase: If your plan has no deductible, you’ll start with the initial coverage phase. If your plan has a deductible and you’ve met it, you then enter the initial coverage phase. During this phase, you may pay a copay or coinsurance, depending on your plan, until your out-of-pocket costs reach $2,000—that’s the spending limit we mentioned above.
3. Catastrophic coverage phase: At this point, you’ve met your deductible and the Part D spending cap. That means you won’t pay anything else for covered prescriptions for the rest of the year. That’s right, $0!

What does this mean for you?

More good news for Medicare Advantage members – it means you get all of the cost-savings mentioned above without having to do anything. These changes will apply to all Medicare members with prescription drug coverage whether covered by a stand-alone Part D plan or any Part C Medicare Advantage plan with prescription drug coverage. Note that the reforms will not impact supplemental insurance or Medigap plans.

The best thing for you to do this Annual Enrollment Period is take a look at your current plan and make sure it still fits your lifestyle and needs. Make sure the medications you need are covered by your prescription drug plan so that they are covered under the $2,000 Part D cap. If you need to find a better fit, we’re happy to help at one of our Customer Connect locations.

Are more changes coming?

Good question! Medicare is continuing to negotiate prices for certain high-cost prescriptions, and those new lowered prices will take effect in 2026.

As these reforms take effect and continue to evolve, we will be sure to keep you updated on the changes that could impact you.

For more information on the IRA and Part D changes, visit the Centers for Medicare and Medicaid Services website at CMS.gov.

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