"When I was young, many people worked for a company with a pension plan that covered them for as long as they lived. If they didn't have a pension plan, they could count on Social Security and Medicare."
-- Robert Kiyosaki, businessman and author of the Rich Dad, Poor Dad series
As fewer people have pensions and more people rely on 401(k)s and IRAs instead, they are still relying heavily on Social Security and Medicare. As of last year, more than 71 million people were receiving benefits from the Social Security Administration. And Medicare was recently covering more than 67 million people.
As you approach retirement -- or just think about and plan for it -- you should be learning about both programs and keeping up with their changes.
Image source: Getty Images.
Here are six changes in the offing for Medicare in 2025.
1. Say goodbye to the "donut hole"
If you know a little about Medicare, you might be familiar with the "donut hole." This is the period after you and your drug insurance plan have spent a certain sum on prescriptions when you have to pay until another sum has been spent -- at which point your insurance coverage resumes.
Starting in 2025, the donut hole is gone, replaced with an annual $2,000 cap for out-of-pocket spending on prescription drugs.
2. You'll be able to pay for prescriptions over time
When you head to your pharmacy to pick up medications, you typically have to pay your share right then and there. That changes in 2025, when you'll be able to spread out payments over multiple installments. This can be handy if the price tag for a medication is steep, as some are.
3. The premium for Part B of Medicare will change
As you probably know, there are currently two kinds of Medicare coverage, and you can (and usually should) enroll in one of them as you approach age 65. One option is "original" Medicare, which features Part A (hospital coverage) and Part B (physician/medical insurance) -- and which enrollees typically augment with a Part D prescription drug plan and sometimes a Medigap supplemental coverage plan, too.
The other option is a Medicare Advantage plan, sometimes referred to as Part C. These plans are offered by insurance companies, not the government, but they're required by law to offer at least as much coverage as original Medicare, and they generally offer more -- such as coverage for vision, hearing, and dental care.
There are pros and cons to both choices but know that no matter which you choose, you'll still have to pay a premium for Part B -- and that premium is usually updated every year, generally increasing. So it's likely that the 2025 Part B premium will be a bit higher than the 2024 one.
4. It might be easier to see a mental health professional
Many Medicare enrollees have had trouble finding available mental health professionals. That's changing for the better. More mental health providers will be permitted to serve Medicare enrollees beginning in 2025. These include addiction counselors, licensed mental health counselors, and marriage and family therapists.
5. You might have access to a weight-loss drug
Traditionally, Medicare doesn't approve drugs for weight loss. But Part D coverage and some Medicare Advantage plans might approve such drugs when they're prescribed for other purposes.
Some of the relatively new, popular weight-loss drugs, such as Mounjaro and Ozempic, can be prescribed for those with diabetes, and Wegovy has been approved by the Food and Drug Administration for overweight people with cardiovascular disease.
So you could find that in 2025, your care provider might be able to prescribe a drug that can help you lose weight -- while delivering other benefits as well.
6. You could pay less -- potentially a lot less -- for your prescriptions
This change actually takes effect in 2026, but it's a big one, and you can look forward to it throughout 2025. Thanks to the Inflation Reduction Act of 2022, Medicare was permitted to negotiate drug prices with pharmaceutical companies, and it resulted in discounted prices for 10 popular drugs, such as Januvia and Entresto (which treat diabetes and heart failure, respectively), with the lower prices effective in 2026. Prices were reduced by between 38% and 79%.
But wait -- there's more! The plan is for 15 more drug prices to be negotiated for 2027, 15 more for 2028, and another 20 for 2029 and beyond. So within a few years, lots of widely prescribed drugs should see prices fall, often significantly.
These are just some of many changes that have been announced for Medicare. If you follow the topic in the news, you'll likely see more changes announced in the coming months and years -- changes that will often be very welcome, contributing to a better retirement.
