This article was written by Elaine Floyd, CFP® and modified from the original, found here.
Medicare open enrollment is about to begin
Over the next few weeks, Medicare beneficiaries will receive their latest plan documents, which explain how the plans will change for the coming year. Those on Original Medicare will want to check their standalone prescription drug plans, while those in Medicare Advantage plans will want to check those plans. If you want to keep your same plan, you don’t have to do anything. If you wish to make a change, you can sign up for a new plan anytime between October 15 and December 7. You can do this directly through the insurance company, through a licensed agent, or through Medicare. Once you are signed up for the new plan, Medicare will take care of dropping the former plan. Changes take effect January 1.
There are several reasons to look more closely at your plan documents this year. They have to do with a number of changes being brought about by the Inflation Reduction Act as well as certain rule changes that could cause insurers to try to make up for the resulting hits to their bottom line. More than in previous years we could see higher premiums, higher copayments, drug formulary changes, and, in the case of Medicare Advantage plans, narrower provider networks and cutbacks in optional covered services such as dental. As the insurers evaluate their business prospects, there is likely to be wide variation in plan changes across the country depending on where insurers are located and how extensive they perceive the financial impact of the changes to be.
As explained in this article, Relief From High Part D Drug Costs Starts in 2024, drug plan changes arising from the Inflation Reduction Act started in 2023 with the $35 monthly cap on insulin. In 2024 and 2025 out-of-pocket spending by the enrollee is capped at $3,300 and $2,000, respectively, with drug plans picking up most of these costs. As you can see from the chart below, in 2024 costs above the coverage gap—the catastrophic phase—were covered by drug plans (20%) and Medicare (80%). In 2025 the coverage gap is eliminated and the share of costs covered by drug plans in the catastrophic phase jumps from 20% to 60%, with drug manufacturers covering 20% and Medicare 20%. With insurers covering more costs next year, it is expected these costs will be passed on to enrollees—in one way or another.
This is why it will be more important than ever to know how your drug plan will operate next year—and to make sure the plan you have suits your individual needs based on the drugs you take (or not). It will NOT be business as usual for the drug insurers, so please be on alert to these developments. The cap on out-of-pocket costs certainly helps people with high drug spending, but if insurers raise premiums and copayments to make up for it, it could hurt everyone else. It’s also worth noting that drug plans are not required to adhere to the Medicare standard drug plan design; they may offer better, or different, coverage as long as it is actuarially equivalent.
Related: Original Medicare vs. Medicare Advantage
The overall generosity (or lack thereof) of a particular drug plan is nearly impossible to assess on the surface. Some may waive the annual deductible and instead charge higher premiums. Some may offer very good coverage for lower-priced generic drugs and make up for it by cutting back on coverage for higher priced drugs. So, rather than trying to analyze how much a drug costs and how much of it the plan will cover, the simpler way to analyze drug plans is to use the Medicare Plan Finder and just look at the out-of-pocket costs. Go to medicare.gov, click on “Find Health and Drug Plans” and follow the prompts. To find the best plan, you will need to enter the drugs and dosages you take. The tool will show a selection of plans and the out-of-pocket costs for each based on zip code and drug regimen. This really should be done every year, but especially this year.
One more change taking effect in 2025 is a new midyear notification to Medicare Advantage policyholders. In response to a study by the Commonwealth Fund that found that three in ten beneficiaries in Medicare Advantage plans did not use any of their plan’s supplemental benefits in the past year, starting in 2025, Medicare Advantage plans will be required to send policyholders a personalized “Mid-Year Enrollee Notification of Unused Supplemental Benefits” in July. It will list all supplemental benefits the person hasn’t used, the scope and out-of-pocket cost for claiming each one, instructions on how to access the benefits and a customer service number to call for more information.
If you would like Lane Hipple to review your Medicare plan documents prior to, or during, this fall’s open enrollment period, please call 856-638-1855 and request a Medicare Review.