As most of you on Medicare know, the annual enrollment period is from October 15 to December 7, when all people with Medicare can change their Medicare health plans and prescription drug coverage for the following year to better meet their needs. Starting October 1, you can compare coverage and costs for all the plans in your area using the Medicare Plan Finder. You can get help for free from your State Health Insurance Assistance Program (SHIP).
Starting in 2025, Medicare beneficiaries will see significant changes in their prescription drug coverage due to the Inflation Reduction Act. These changes are designed to make medications more affordable and
accessible. Be sure to shop your plan this year! Here are some of most important updates:
- Out‐of‐Pocket Spending Cap: For the first time, there will be an annual out‐of‐pocket cap on prescription drug costs under Medicare Part D. Once a beneficiary reaches the $2,000 cap, they will no longer have to pay out‐of‐pocket costs for their medications for the rest of the year.
- Elimination of the Donut Hole: The coverage gap, often referred to as the “donut hole,” will be eliminated, ensuring that beneficiaries do not face a sudden increase in costs after reaching a certain threshold.
- Lower Insulin Costs: The act also caps the cost of insulin at $35 per month for all Medicare beneficiaries, providing significant relief to those managing diabetes.
- Price Negotiation for Certain Drugs: In 2023, Medicare negotiated prices for 10 of the highest‐spending, brand‐name Part D drugs without competitors, and it published prices in 2024. CMS will negotiate prices for 15 more drugs in 2025, with prices going into effect in 2027.
- Medicare Prescription Payment Plan: In 2025 to help manage out‐of‐pocket costs, you can now opt to pay out‐of‐pocket prescription drug costs as monthly payments over the course of the plan year.
- Dementia Support Programs: In 2025, a new program called Guiding an Improved Dementia Experience (GUIDE) will offer services to people with dementia and their unpaid caregivers, aiming to keep patients at home longer.
With all these changes to Medicare Part D, it is important that you revisit your Part B, your Part D plan and your supplemental plan and if you have that, your Medicare Advantage plan: since you first enrolled, your medical needs and medications may have changed and other plans might have lower prices. There can be a lot of price differences for drugs between the Part D plans. Go to Medicare.gov and find the plans available in your area.
If you’re signing up for Medicare for the first time, it’s important to do so around your 65th birthday. If you work for a company with more than 20 employees, you can stay on the company’s group health plan, but you must enroll in Medicare Part A, which is free. If you want Medicare to start when your employer‐based health coverage ends, you’ll need to sign up for Part B, Part D, and consider a supplemental Medigap plan in the month before your other insurance stops. Even if you’re not taking medications, enrolling in a Part D drug plan is essential once you’re on Medicare. Plans can start as low as $7 per month, which is far cheaper than the lifelong penalty if drug coverage is needed later.
If you remain on your company plan past age 65, make sure you have ‘creditable drug coverage’ to avoid a late enrollment penalty for Part D. This penalty is 1% of the national base beneficiary premium ($34.70 in 2024) for every month without creditable drug coverage. Though small (about 35 cents per month), it adds up over time and lasts for life.
One common scenario that can lead to penalties is when someone continues working past 65 and is on an employer plan with an HSA and a high‐deductible health plan (HDHP). While they may know NOT to enroll in Medicare to keep HSA contributions, they might not realize the HDHP’s drug coverage is not creditable. When they later switch to Medicare, they face a Part D penalty for the time they lacked creditable drug coverage. Another situation involves retirees with health insurance from a former employer. If you’re 65 or older, Medicare is the primary payer, so you must sign up for Parts A and B. You may not need additional supplemental insurance (like Medigap or Medicare Advantage) if your retiree insurance acts as a supplement, often including drug coverage. If that drug coverage isn’t ‘creditable’, a penalty will apply when you later enroll in Part D.
‘Creditable drug coverage’ is coverage that is actuarially equivalent, which is of course is complicated to figure out yourself. Most late‐enrollment penalties are the result of not knowing the rules. To avoid this, always ask your employer whether your plan provides ‘creditable drug coverage.’ While employers should inform you, it’s a good idea to take the initiative and ask.
