Major 2025 Medicare Changes: What You Need to Know Before Enrolling!

The annual Medicare enrollment period is now open until December 7, and this year, selecting a plan may prove to be more challenging for many seniors, according to industry experts.

This year introduces a significant change: prescription drug out-of-pocket expenses are now limited to $2,000 annually. Additionally, Medicare participants can opt to spread these costs across the year with capped monthly payments, rather than paying the full amount upfront at the pharmacy. This adjustment is particularly beneficial for those who spend up to the limit. The AARP projects that by 2025, about 3.2 million Americans, or 8.4% of all Part D plan holders, will benefit from this cap.

However, to cover these new benefits, insurance companies are modifying their plans, which could lead to reduced benefits and increased costs for many seniors, experts warn.

Insurance providers are reducing the number of plans available, withdrawing from markets they consider unprofitable, cutting back on popular benefits such as dental coverage, and increasing deductibles, premiums, and co-payments for all Medicare participants.

“The Medicare marketplace this year is set to be unusually turbulent,” stated Vijay Kotte, CEO of Medicare marketplace GoHealth. “Seniors are facing a season with fewer choices, higher expenses, and reduced benefits, making this one of the most disruptive enrollment periods in recent years.”

Scope of Impact on American Seniors

• Over 67 million Americans are currently enrolled in Medicare, as reported by the Centers for Medicare and Medicaid Services (CMS), split between traditional Medicare and Medicare Advantage plans.
• Traditional Medicare, the federal health insurance program, covers hospitalization under Part A and medical services under Part B. The monthly premium for Medicare Part B in 2024 is set at $174.70, which could increase based on income levels.

A majority of those on traditional Medicare, more than 80%, also subscribe to a Part D plan for prescription drugs. Many also purchase a supplemental plan, commonly referred to as Medigap or Plan G, which covers all additional out-of-pocket costs like co-insurance and co-payments after the deductible is met. Without this, Medicare does not cover 20% of medical or prescription costs, and there is no cap on out-of-pocket expenditures.

Benefits of Choosing Medicare Advantage

• Medicare Advantage plans, offered by private insurers, often advertise $0 or low monthly premiums. However, as Cindy George from GoodRx explains, this means there is no additional premium beyond the standard Part B premium, which is typically deducted from Social Security payments. These plans usually cover all Medicare parts and may include extra benefits like vision, dental, hearing coverage, or even gym memberships. They also involve co-pays or co-insurance for most services.
• With the recent changes, approximately 6 million Medicare Advantage enrollees are expected to see a reduction in their plan’s benefits for the first time, according to GoHealth.
• Additionally, about 1.3 million Americans will need to find new Medicare coverage in 2025 as their current Medicare Advantage plans will no longer be available, reports America’s Health Insurance Plans. This organization also notes that the number of stand-alone Part D plans will decrease by 26% in 2025 due to the new $2,000 cap on out-of-pocket drug expenses.

Finding a New Plan

Mary Johnson, a 73-year-old retiree, faces the challenge of finding a new Part D plan. She is currently enrolled in a popular Aetna plan with a $5 monthly premium, which covers her three generic prescriptions with zero co-pay before meeting her deductible. This plan will be discontinued in 2025.

“The cheapest alternative for the same medications would increase my premiums and out-of-pocket costs by $476, which is a 750% increase,” Johnson shared. This is particularly concerning as the Social Security cost-of-living adjustment for 2025 is just 2.5%.

Choosing the Right Plan: What to Consider

Experts offer the following advice to save on costs:

• Set up an account on Medicare.gov, enter your medications, choose a pharmacy, and input your location to compare plans, providers, and drug prices. Mike Ramirez from EP Wealth Advisors recommends checking prices at different pharmacies to potentially find lower costs.
• If medication prices are prohibitive, look into assistance programs such as Medicare’s Extra Help and Medicare Savings Programs, or consider free discount programs like GoodRx. Cindy George notes that using such discount programs won’t count towards meeting a deductible, but for those not reaching their deductible, they might offer better savings.
• Consult a professional, preferably an insurance broker who represents multiple companies to avoid biases, suggests Cynthia Pruemm, CEO of SIS Financial Group. Additionally, free personalized counseling is available through the State Health Insurance Assistance Program, often found in local senior centers or family service departments.
• Part D participants can choose to pay for their medications in monthly installments starting in 2025, a feature everyone should consider, according to Brian Whorley, CEO of Paytient.

“Holding onto your money longer can be advantageous,” Whorley explained. “This is particularly true if you prefer reviewing bills monthly and value predictability in your expenses.”

• Be cautious if switching to a Medicare Advantage plan due to its typically lower premiums, as once you drop a Medigap policy, it’s generally not possible to reinstate it if you change your mind later, Johnson advised.

Medicare Advantage plans have annual caps on out-of-pocket costs, but these caps are set to increase in 2025, according to America’s Health Insurance Plans. The proportion of plans with maximum out-of-pocket costs exceeding $5,000 will increase to 52% from 46% in 2024. In contrast, with a traditional Medicare policy coupled with a Medigap plan, your annual out-of-pocket expense is limited to the Part B deductible, which is $240 in 2024.

Also, consider your travel frequency and the availability of providers in your area. Traditional Medicare covers nearly all doctors and hospitals and does not require referrals, whereas Medicare Advantage requires staying within network providers and might necessitate referrals and pre-authorizations for some treatments. “Medicare Advantage can be more restrictive if you travel frequently, as you must stay within the network,” Pruemm explained.

Even though traditional Medicare combined with a Medigap plan may have higher monthly premiums, “Plan G offers comprehensive benefits,” said Brandon Hill, a senior advisor at Beckett Financial Group. “If it fits into your budget, it’s worth considering.”