The Medicare Annual Enrollment Period (AEP) is a pivotal time period during which all Medicare beneficiaries can evaluate and optimize their existing healthcare and prescription drug coverage. The Annual Enrollment Period runs from October 15 to December 7, during which beneficiaries can review their current coverage and opt to make changes based on shifting medical or financial needs.
With several significant changes going into effect for Part D Prescription Drug coverage due to the Inflation Reduction Act, AEP promises to be particularly busy this year. The revamped program promises thousands in savings over prior years’ prescription drug costs by lowering the cap on out-of-pocket expenses. In addition, the “donut hole,” or coverage gap, will no longer exist, eliminating additional expenses typically incurred before moving to the catastrophic coverage stage.
Given these changes, all beneficiaries, even those satisfied with their current coverage, may want to evaluate their needs and potential expenses as part of this annual review period to ensure their coverage meets their unique financial and medical needs.
How Will Part D Coverage Work in 2025?
Previously, Medicare beneficiaries with Part D coverage were required to navigate four stages of prescription drug coverage. However, in 2025, changes made to the program’s structure will simplify the process, reducing the number of stages from four to three.
The first stage of Part D prescription drug coverage has always been the deductible. In 2025, the deductible will increase to $590, up from $545 in 2024. While deductibles can vary by plan, this is the maximum any plan can charge.
From there, beneficiaries will enter the initial coverage stage, where out-of-pocket costs apply (e.g., copays and coinsurance up to a certain amount). Next year, the out-of-pocket maximum at this stage will drop significantly, more than 60%, from $5,034 in 2024 to $2,000 in 2025.
Will The Part D Donut Hole Still Exist?
Typically, once a beneficiary meets their out-of-pocket maximum at the initial coverage stage, they would move to the third stage, the “donut hole” or coverage gap, where a limit is placed on what their drug plan will pay for covered prescriptions. At this stage, an additional out-of-pocket maximum would apply (up to $8,000 in 2024, which included the previous two stages’ costs), with beneficiaries required to pay 25% of the cost of brand-name and generic prescription drugs covered by the drug plan and 25% of the dispensing fee associated with brand-name drugs. Upon meeting this second out-of-pocket cost, the beneficiary would move into the final stage, catastrophic coverage, where the plan covers all expenses.
One of the most significant changes expected in 2025 concerns the third stage of prescription drug coverage. Next year, this third stage, the “donut hole,” will be eliminated. This change, along with a notable decrease in the maximum out-of-pocket expenses, will allow beneficiaries to reach the catastrophic coverage stage much sooner, providing significant financial relief for millions of Americans.
Can I add Part D coverage during the Annual Enrollment Period?
There are numerous changes Medicare beneficiaries can make during the Annual Enrollment Period, including adding, dropping, or changing Part D Prescription Drug coverage. Beneficiaries receiving healthcare coverage through Original (or “Government”) Medicare will be familiar with Medicare Parts A and B. With Original Medicare, beneficiaries can opt into a Part D Prescription Drug plan, whether they currently have the coverage. Medicare Advantage plans typically include prescription drug coverage, but a Part D plan can be added if a switch is made to Original Medicare.
While the Part D program adjustments are expected to provide significant savings, beneficiaries should remember that plans can change each year, so additional changes will likely be made. While the out-of-pocket maximum may have decreased, adjustments to other expenses, such as monthly premiums or copays, may occur. Reviewing available options before the end of AEP to determine if the plan still provides the best possible coverage remains a vital step for all beneficiaries.
Talk to Medicare experts about your options
The Annual Enrollment Period is a critical decision-making period. Our team of experienced licensed insurance agents at Aevo Insurance Services, a division of Brown & Brown Absence Services Group, are here to support you. Reach out today to speak with an agent about the enrollment process and how to best select a Medicare plan, including Part D coverage, for your unique medical and financial needs.
