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What You Need to Know About Changes to Medicare Part D in 2025

Two important changes are coming for Medicare Part D beneficiaries in 2025 as a result of the Inflation Reduction Act:

  1. Annual out-of-pocket (OOP) cap of $2,000 for prescription drugs.
  2. Medicare Prescription Payment Plan (MPPP), which will allow beneficiaries who opt in to spread their costs for drugs in monthly payments across the entire year.

The Inflation Reduction Act was passed in 2022, and some provisions have already taken effect, such as free vaccines and the expanded Extra Help program. Others, such as the OOP limit and MPPP, will go into effect on January 1, 2025. Read on for answers to some frequently asked questions about these changes.

What is changing, and to whom do the changes apply?  

The $2,000 OOP maximum eliminates the Medicare Part D coverage gap, also called the “donut hole,” which in 2024 applies to plan spending between $5,030 and $8,000. It also introduces a new monthly payment plan for OOP costs. This applies to Medicare Part D costs only. It doesn’t apply to costs under Medicare Part B, which covers drugs administered by doctors or nurses in clinical settings (like injections or infusions).

Do I need to do anything to benefit from the OOP cap?  

No, the OOP cap will apply automatically to all Medicare Part D beneficiaries.

How will the MPPP work?  

The MPPP can help beneficiaries spread their OOP drug costs across the year instead of paying larger amounts upfront. For example, a beneficiary enrolled in the MPPP who incurred $3,000 worth of uncovered costs in January would:

  1. Only have to pay $2,000 (the OOP maximum), and
  2. Have that remaining $2,000 spread into monthly payments of approximately $182 each.

What steps do Medicare beneficiaries need to take to participate in the MPPP?  

The MPPP is opt-in only—it won’t apply automatically like the OOP cap. Beneficiaries can opt in starting during open enrollment (October 15 through December 7, 2024) by contacting their Medicare Part D plan. Participants can opt in (and opt out again, if desired) at any point in plan year 2025.

What kind of information should beneficiaries expect to receive from Medicare, and when? 

Official guidance from the Centers for Medicare and Medicaid Services (CMS) requires that Part D plan sponsors engage in outreach and education about the MPPP to plan beneficiaries. Sponsors must independently identify beneficiaries who incurred more than $2,000 in OOP spending through September of the previous year and send a “Likely to Benefit” notice to these beneficiaries no later than December 7, 2024 (the end of the open enrollment period). If you don’t receive this notice, you may still contact your Part D plan to determine if you could benefit.

Where can I find more information about the OOP cap and MPPP? 

CMS has a patient resource page on the MPPP here: www.medicare.gov/prescription-payment-plan

The PAN Foundation has also compiled this useful explainer on upcoming Part D changes: www.panfoundation.org/everything-you-need-to-know-about-medicare-reforms/

https://www.lungevity.org/blogs/what-you-need-to-know-about-changes-to-medicare-part-d-in-2025

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