• Drug cost cap
• Mental healthcare
• Caregivers
• PSHB program
• Telehealth
• Premium changes
• Summary

Several changes to Medicare will occur in 2025, including a cap on out-of-pocket prescription drug costs, expanded mental health care services, and increased caregiver support.

These changes aim to improve access to care and reduce financial burdens for people using Medicare.

Medicare is a cornerstone of healthcare for millions of Americans, providing health insurance for individuals ages 65 years and older and those with certain disabilities.

This article discusses the most important updates to Medicare for 2025 and their implications for beneficiaries.

Glossary of Medicare terms

We may use a few terms in this article that can be helpful to understand when selecting the best insurance plan:

• Out-of-pocket costs: An out-of-pocket cost is the amount a person must pay for medical care when Medicare does not pay the total cost or offer coverage. These costs can include deductibles, coinsurance, copayments, and premiums.
• Deductible: This is an annual amount a person must spend out of pocket within a certain period before an insurer starts to fund their treatments.
• Coinsurance: This is the percentage of treatment costs that a person must self-fund. For Medicare Part B, this is 20%.
• Copayment: This is a fixed dollar amount a person with insurance pays when receiving certain treatments. For Medicare, this usually applies to prescription drugs.

Cap on prescription drug costs 

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One of the major changes to Medicare in 2025 is a $2,000 cap on prescription drug costs.

Once someone’s out-of-pocket spending for prescription drugs reaches $2,000, they will no longer have to pay copays or coinsurance for the remainder of the calendar year. This cap includes out-of-pocket expenses and certain payments made by other entities, such as Medicare’s Extra Help program.

However, it is important to note that this cap only applies to drugs covered under Medicare prescription drug plans (Part D). It does not apply to medications or therapies a health provider administers in their office or medications not on the plan’s formulary. A formulary is a list of prescription drugs a Part D or Medicare Advantage plan covers.

This change may affect Medicare Advantage plans as they will bear more responsibility for Part D costs due to the new cap and limited increases in government funding. These changes could lead to increased premiums, higher drug deductibles, or reduced benefits.

In light of these changes, it is important that people review their plan options during the annual open enrollment period (October 15 to December 7). This way, they can ensure their medications are covered and check for changes in costs or coverage.

Expansion of mental health care

Beneficiaries will now receive a more comprehensive assessment, including questionnaires known as “social determinants of health risk assessments,” as part of the annual wellness visit (AWV).

These tools help identify a person’s social needs, such as housing or lack of access to food, and connect them with appropriate referrals to services and support.

Cognitive assessments will also become a standard part of the AWV to screen for signs of dementia and thinking impairment.

If concerns arise, Medicare may cover a separate, comprehensive evaluation that covers not only dementia but also conditions such as depression, anxiety, or substance use disorder.

Medicare will also place a greater emphasis on identifying and addressing potential substance use disorders with a specific focus on opioids.

During the AWV, the healthcare professional will review the pain management plan, offer non-opioid alternatives, and, if necessary, refer the individual to a specialist for further treatment.

When a participating provider provides these mental health services during the AWV, they will not charge the beneficiary for them.

However, if the healthcare professional performs additional tests or services that Medicare does not cover, the individual may be responsible for coinsurance and deductibles.

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Medicare Costs Defined

Extra resources for caregivers

From 2025, Medicare will cover training for caregivers to support them in their caring role. If a healthcare professional determines that caregiver training is necessary to meet a beneficiary’s health goals, the caregiver can attend a training program.

The programs can be in individual or group settings and cover medication administration, personalized care techniques, and more.

While Medicare covers a portion of this training, the beneficiary is responsible for 20% of the Medicare-approved amount, and the Part B deductible applies.

Medicare will also start covering inpatient respite care for beneficiaries receiving hospice services. The individual receiving hospice care can stay in a facility Medicare approves for up to 5 days at a time so the caregiver can have a break.

A new pilot program, the Guiding an Improved Dementia Experience Model, aims to provide additional support for individuals living with dementia, their families, and unpaid caregivers.

Postal Service Health Benefits (PSHB) Program

Starting January 1, 2025, United States Postal Service employees, retirees, and their families will transition to a new benefits program called the Postal Service Health Benefits (PSHB) Program.

The Office of Personnel Management (OPM) administers this program and will provide health coverage separate from the previous Federal Employee Health Benefits (FEHB) Program.

To maintain health coverage through the Postal Service, individuals must enroll in a PSHB plan by the new year.

However, individuals with coverage under a family member’s FEHB plan not provided through the Postal Service can retain that coverage beyond 2025.

Similarly, former employees and their families on Temporary Continuation of Coverage through FEHB before January 1, 2025, can continue with their existing plan.

Changes to telehealth coverage

Medicare will continue to cover telehealth services at any location, including an individual’s home, through December 31, 2024. However, after this date, most telehealth services will require beneficiaries to be in an office or medical facility in a rural area.

Despite these changes, certain services, such as mental and behavioral healthcare, will still be accessible from home, regardless of where the person lives. This means that treatments for mental health conditions, substance use disorders, and other select medical services can still take place remotely.

Additionally, specialized care, such as monthly end stage renal disease (ESRD) visits, acute stroke evaluation, and diabetes self-management training, will remain available via telehealth in any location.

Medicare Advantage plans and some Original Medicare providers participating in Accountable Care Organizations (ACOs) may also offer expanded telehealth options beyond basic Medicare coverage.

People may wish to compare plans and check with their insurer to understand the specific telehealth benefits available to them, as these may vary depending on the plan or provider’s policies.

Learn more about Medicare’s coverage of telehealth.

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Changes to premiums

The Medicare Part B premium increases each year. In 2025, the Part B premium is $185, which is an increase of $10.30 from 2024.

Individuals enrolled in Medicare Advantage plans may also experience premium adjustments.

Premiums for stand-alone Part D prescription drug plans may see adjustments as insurers try to balance the new $2,000 out-of-pocket cap.

The Centers for Medicare and Medicaid Services (CMS) expressed concern about potential disruptions in the prescription drug plan (PDP) market as a result of the Inflation Reduction Act, which made insurers more financially responsible during the catastrophic phase of Part D.

To address this, the CMS has implemented a 1-year nationwide demonstration program that aims to stabilize Part D premiums.

This initiative caps any year-over-year premium increase for 2025 at $35. Insurers who participate in the program receive financial support from the government to help contain costs. They also have the option to extend their participation for an additional 2 years.

Summary

In 2025, Medicare is introducing several significant changes, including new benefits and adjustments to existing ones.

A key update is the introduction of a $2,000 cap on out-of-pocket prescription drug costs, offering relief to those enrolled in Part D plans.

Medicare is also expanding mental health care access and providing extra support for caregivers through training and respite care.

Telehealth services will continue to be available at home through the end of 2024, but some restrictions will apply afterward.

United States Postal Service employees and retirees will also transition to a new Postal Service Health Benefits (PSHB) program, replacing their current Federal Employee Health Benefits (FEHB) Program coverage.

Lastly, while premiums for Medicare Part B, Advantage, and Part D plans may increase, the government has taken steps to limit the extent of these changes, particularly for prescription drug plans.