Medicare Part D and Advantage Premiums to Decrease in 2025

In a significant development for Medicare beneficiaries, the Centers for Medicare and Medicaid Services (CMS) has announced that average premiums for both Medicare Part D and Medicare Advantage plans will decrease in 2025. This news comes as a relief to many seniors and individuals with disabilities who rely on these programs for their healthcare needs.

Decrease in Part D Premiums

For Medicare Part D, the average monthly premium is projected to fall by $7.45 in 2025, dropping from $53.95 in 2024 to $46.50. This reduction is part of broader changes aimed at stabilizing and improving the Part D program. The base beneficiary premium for Part D in 2025 will be $36.78, an increase of $2.08 or 6% over the 2024 base premium, but actual premiums will vary depending on the plan and location.

Elimination of the Coverage Gap and New Out-of-Pocket Cap

The Inflation Reduction Act has introduced several key changes to the Medicare Part D benefit. Notably, the coverage gap phase, often referred to as the 'donut hole,' will be eliminated starting January 1, 2025. Instead, Part D plans will have a simplified three-phase benefit structure: a deductible phase, an initial coverage phase, and a catastrophic phase. Additionally, there will be a new $2,000 cap on out-of-pocket drug spending for Part D enrollees in 2025, significantly reducing financial burdens for those with high drug costs.

To help manage these changes, CMS has also introduced a voluntary Part D Premium Stabilization Demonstration. This program aims to reduce premium increases by applying a uniform reduction of $15 to the base beneficiary premium for participating stand-alone prescription drug plans (PDPs) and limiting total Part D premium increases to $35 between 2024 and 2025.

Stability in Medicare Advantage Plans

Medicare Advantage (MA) plans are also expected to see stability and slight reductions in premiums. The average monthly premium for MA plans is projected to decrease from $18.23 in 2024 to $17.00 in 2025. Enrollment in MA plans is anticipated to increase to 35.7 million individuals in 2025, representing about 51% of all Medicare beneficiaries. Many beneficiaries will see zero-dollar premiums or reductions in their current premiums, with 83% maintaining the same or lower premiums if they continue with their current plans.

The CMS has been working to align Medicare Advantage prices with those of traditional Medicare, ensuring that private insurers can continue to offer comprehensive benefits without significant rate increases. This stability is crucial as Medicare continues to evolve to meet the changing healthcare needs of its beneficiaries.