Medicare Prescription Drug Coverage: 3 Things to Know

June 14, 2025

As with any health insurance, Medicare changes from year to year. However, the changes in Medicare’s prescription drug coverage for 2025 seem to have created more confusion than in years past.


The Inflation Reduction Act (IRA) of 2022

Signed into law in 2022, the IRA went into effect beginning January 1, 2025. There was a lot of publicity around how the law would impact Medicare prescription drug coverage, and members received information via mail and email.


Here are three of the biggest changes for 2025:

1. There is a $2,000 out-of-pocket maximum.

Those with Part D plans through traditional Medicare and Medicare Managed Care Plans (Medicare Advantage Plans) with prescription drug coverage won't pay more than $2,000 over the calendar year in out-of-pocket costs for their prescription medications. There is a $590 annual deductible on most plans. Once you reach the $2,000 maximum you will pay $0 for Tiers 1, 2, 3, 4, and 5 drugs as long as they are in the formulary. (If a medication is not in the formulary, your doctor can apply for an exception.) The only cost you will incur is your monthly premium.

Note that the $2,000 maximum includes your deductible, copays and what your insurance pays for. The IRA also eliminated the Prescription Drugs Coverage Gap – known as the “donut hole.”


2. Plan premiums are higher.

It’s not unusual for monthly premiums to increase from year to year. However, all prescription drug plans are higher for 2025 because of the IRA – and in some cases the increases are sizable.

The good news is that many people will see a significant drop in expenses because of the cap on out-of-pocket costs, as well as the elimination of the coverage gap.


3. You may be paying more for medications.

The IRA resulted in changes to the prescription drug tiers as well, with certain medications moving from one tier to another in the formularies. Tiers are locked in for 2025, so it’s important to work with your pharmacist to determine the most cost-effective options. When reviewing your plans for 2026, keep in mind that each insurance company can change the formularies from one plan to another.


Understanding your plan is a must.

We tell our Medicare clients this all the time: when you receive your “Annual Notice of Change" (ANOC) document in September, you must read it carefully!

It is surprising how many people simply toss these notices in a drawer or in the trash without reading them. Your ANOC contains detailed information about any changes in coverage and costs that will be effective in the following year. And if you are unhappy with the benefits your plan is offering – or unsure about what the changes will mean for you – THAT is the time to speak with an experienced Medicare agent who can offer guidance.


Why? Because the Medicare Annual Enrollment Period (AEP) begins in mid-October. Those currently enrolled in Medicare will have the opportunity to change their current Medicare Managed Care Plans (Medicare Advantage Plans) or stand-alone prescription drug coverage.



Navigating the Medicare maze can be challenging.

Whether you are new to Medicare or exploring other plan options, it can be overwhelming to figure out which coverage is best for you. But you don’t have to do it on your own. With over 20 years of experience, we promise you an honest and eye-opening conversation about how Medicare works and a clear understanding of what your choices are.

And we never charge for our services. Call Bruce or Marcia at 973-628-0694 to schedule a complimentary consultation.

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