Medicare Part D Premiums May Rise Up to $50 Monthly in 2025

Medicare Part D enrollees may face substantial premium increases, potentially up to $50 monthly, during the upcoming open enrollment period starting October 15. Part D drug plans, which supplement original Medicare and are offered by private insurers, require beneficiaries to pay monthly premiums.

These increases mainly affect stand-alone Part D plans, rather than the drug coverage within Medicare Advantage plans. Several factors contribute to expected premium hikes, notably increased utilization of high-cost therapies, such as weight loss and autoimmune drugs, along with legislative changes capping out-of-pocket expenses and cost shifts to insurers. Prescription drug spending growth exceeded 10% in 2024, driven by novel, expensive medications and greater use among Medicare beneficiaries. The Inflation Reduction Act established a $2,000 annual cap on out-of-pocket drug costs, shifting more expenses to insurers who may offset this by raising premiums across all policyholders. This cap benefits enrollees needing specialty drugs by reducing catastrophic costs, but the broader enrollee base shares the financial impact through higher premiums. Medicare Advantage plans are less likely to raise drug premiums due to higher government reimbursements, enabling them to offer additional benefits and mitigate drug cost increases.

This divergence is increasingly steering beneficiaries toward Medicare Advantage, as the combined costs of traditional Medicare and stand-alone Part D plans become less affordable. Meanwhile, a federal premium stabilization program, initiated to counteract premium spikes from Inflation Reduction Act changes, will continue with reduced funding in 2025. This program will allow insurers to increase premiums by up to $50 monthly, an increase from the previous $35 cap. It remains uncertain how many insurers will maximize these increases, but some are expected to do so. Experts strongly advise Medicare beneficiaries to actively review and compare their drug coverage plans during open enrollment to address rising costs and changing plan benefits effectively.