2025 Medicare Part D Changes: Four Scenarios

By Jill Tyrer | Oct. 18, 2024

Considering changes to Medicare that are beginning in 2025 is important when weighing your insurance options during open enrollment. Here are four scenarios showing how people may be affected and who might benefit.
 

Scenario 1: Newly Eligible

John is just turning 65, signing up for Medicare for the first time, and trying to figure out how to handle drug costs. He uses adalimumab injections to manage his psoriatic arthritis, and his employer insurance has covered it, but now he’s retiring and is looking into his Medicare options.

He considered Medicare Advantage plans but found that he might not be able to continue seeing his dermatologist, rheumatologist and other specialists who know him. Plus, the plans require prior authorization for therapies John knows he will need, and his out-of-pocket costs were potentially going to be higher.

Instead, John chose to sign up for original Medicare (Parts A and B), and to get drug coverage under Part D. He can no longer use copay coupons for his adalimumab once he begins Medicare, so he also is considering a medigap plan to help cover out-of-pocket costs as well as coverage for hearing, dental and vision, which original Medicare doesn’t cover. Fortunately, with changes to Part D, his medication is going to be more affordable.

Starting in 2025, his out-of-pocket costs for medications will be capped at $2,000. After John has paid that amount for his share of drugs and other costs, he won’t have to pay anymore. 

Additionally, he can opt in to the Medicare Prescription Payment Plan (MPPP) starting in 2025 that lets him spread his out-of-pocket costs evenly throughout the year. That will protect John from facing a backbreaking bill for his medications in any one month.
 

Scenario 2: Notification of Creditable Coverage

Leanne, 66, is still working and getting insurance through her employer — a company with more than 100 employees. It also has been covering part of the cost of the etanercept she takes for her rheumatoid arthritis.  

She recently received a “notice of creditable coverage” from her employer health insurance, indicating that she could get her etanercept at a better price through Medicare. 

She looked into her Medicare options and found that, even with having to pay for original Medicare, her annual cost for the etanercept was a fraction of what it cost through her employer insurance. That’s because it is one of the first drugs that Medicare has negotiated with the drug maker to pay a much lower cost.

Because Leanne cannot use copay coupons when she is on Medicare, she has to figure out how much in total she would pay annually using a copay card, then compare that with the $2,000 cap she would have under Medicare. She also would need to consider whether there would be any times when her drug cost would be especially large under her employer’s insurance. Under Medicare, she would be able to opt into the Medicare Prescription Payment Plan to smooth out those costs over the year.

Leanne needs to weigh the premiums and deductibles for her employer’s plan and how much of it her employer pays against what she would pay for original Medicare premiums and deductibles plus coverage (if she wants) for vision, dental and hearing. Then she needs to consider what she pays annually out of pocket (with her copay card) for her etanercept and other medications under her employer’s plan compared to $2,000 under Medicare Part D.
 

Scenario 3: Currently on Medicare Advantage

Juanita is currently enrolled in a Medicare Advantage plan that includes coverage for vision, hearing, and dental, along with 100% coverage for her rheumatoid arthritis medication. Despite being on this medication for years, she had to try less expensive alternatives (step therapy) before her plan would cover her preferred biologic. Additionally, she had to switch to a new rheumatologist, and her plan frequently requires prior authorization for treatments.

As open enrollment approached, Juanita learned about upcoming changes to Medicare Part D and decided to compare her costs. She evaluated her Medicare Advantage plan’s premiums, deductibles and out-of-pocket costs against what she would pay for original Medicare with Part D, plus Medigap to cover additional needs like hearing, vision and dental. She was particularly interested in the new $2,000 cap on out-of-pocket drug costs, starting in 2025, which could significantly lower her expenses.

However, switching to original Medicare with a Medigap plan is not always straightforward. Medigap policies are only guaranteed issue when you first become eligible for Medicare or during certain other limited periods, such as within the first 12 months of joining a Medicare Advantage plan. (Guaranteed issue means the insurance company must offer you coverage without considering your health status, known as “medical underwriting.”) Outside of these periods, insurers can deny coverage or charge higher premiums based on Juanita’s health status because medical underwriting applies.

This could make Medigap plans more expensive or even unavailable to Juanita because she has an existing health condition, rheumatoid arthritis. Without a guaranteed issue right, her premiums could be significantly higher than when she first enrolled in Medicare, potentially outweighing the benefits of switching back.

Despite these potential barriers, Juanita carefully reviewed her costs and decided that the benefits of having fewer restrictions under original Medicare outweighed the potential challenges. She considered not only the lower out-of-pocket drug cap but also the freedom to see her preferred doctors and avoid the hurdles of step therapy and prior authorizations.

Ultimately, Juanita opted to proceed with switching back to original Medicare, Medigap and Part D, but she carefully weighed the financial risks involved, including potentially higher Medigap premiums or the need to shop around for a plan that would accept her.
 

Scenario 4: Loss of coverage

George lost his Medicaid coverage and he needs to sign up for Medicare even though it’s not time for open enrollment. George can apply for a Special Enrollment Period to sign up for original Medicare by submitting a completed form CMS-10797 by mail or fax to his local Social Security office.

Once he was enrolled in Parts A and B, George explored his options between Medicare Advantage and Part D. The ustekinumab for his psoriatic arthritis is expensive, but he noticed that it’s one of the drugs that Medicare has negotiated a lower price for beginning in 2026. Plus, he won’t have to pay more than $2,000 out of pocket for his medications, and George will be able to join a plan to make payments every month instead of coming up with a big payment all at once on his fixed income.