Aug 15, 2024
Approximately 67.3 million people are enrolled in Medicare, according to the Centers for Medicare and Medicaid Services. Those 65 and older rely on Medicare to stay healthy, whether they sign up for traditional Medicare coverage through the government or Medicare Advantage Plans offered by private insurers.
For the millions collecting Medicare, it's important to know that some changes are coming in 2025. These modifications will affect spending limits for prescription drugs and introduce a couple of other improvements that are expected to provide better healthcare to seniors. Here's what you need to know.
1. New prescription drug benefits will reduce out-of-pocket costs
Prescription drug spending has long been a pain point for seniors, with Kaiser Family Foundation reporting that 76% of seniors believe their medication costs are unreasonable even when covered by Medicare Part D (the voluntary Medicare prescription drug plan).
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Fortunately, these seniors will find some relief soon. A new cap on prescription drug costs is taking effect in 2025 thanks to the Inflation Reduction Act.
Starting next year, seniors covered by Part D will have a $2,000 out-of-pocket limit. This applies only to medications paid for by Part D, not those covered by Medicare Part B (which include things like vaccines or injections administered by doctors in office). The $2,000 limit is also indexed to inflation, so it can change over time.
Part D also has a coverage gap phase, where seniors continue to pay 25% of the cost of their drugs after hitting a certain spending threshold. This will be eliminated starting next year, so they'll move straight from the initial phase of Medicare Part D to the catastrophic phase, which offers more coverage.
Plus, seniors can also choose to spread their drug payments out over the course of the year, rather than having to bear a large financial burden all at once.
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2. Improvements to Medicare Advantage Plans help seniors take advantage of benefits
Seniors can opt to purchase Medicare Advantage Plans instead of relying on traditional Medicare offered by the government. These plans come with varying premiums but often provide more benefits. In 2025, some changes will be made to these plans to maximize the chances that seniors get to use the services they're paying for.
Specifically, companies offering Medicare Advantage Plans are subject to a new requirement to distribute a "Mid-Year Enrollee Notification of Unused Supplemental Benefits" each year. This notification should be sent to seniors and list all supplemental benefits their plan covers that they didn't use during the first half of the year.
The notifications must include:
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- The scope of the benefit
- Any cost-sharing provisions
- Instructions for accessing the benefit
- A telephone number to reach customer service for help if there are questions or concerns
More than 99% of Medicare Advantage Plans offer at least one supplemental benefit, whether it’s dental, fitness or hearing benefits, while the median number in 2022 was 23. The new notifications can hopefully help more retirees take advantage of these services.
3. A change to how insurance agents are compensated for helping seniors
Finally, agents offering support to seniors signing up for healthcare coverage will be compensated differently starting in 2025.
The government will pay $100 more per enrollment to agents who sign seniors up for Medicare Advantage Plans or Medicare Part D for the first time — a significant increase from the proposed $31 pay increase for agents.
However, Medicare is ending sales incentives for agents who currently receive bonuses, including volume-based bonuses, for signing people up for Medicare Advantage Plans, Medicap Plans or Part D. Medicare is also putting a stop to agents and brokers collecting "administrative fees" above the fixed compensation cap the government has put in place.
The hope is that providing agents with fair initial compensation will no longer incentivize them to steer seniors towards plans that may not be a good fit.
These three modifications could alter how you use your Medicare plan, how you sign up for it and how much you spend out-of-pocket on care. It's important to review them, as they'll affect your budget and which Medicare plan you choose.
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Christy Bieber has 15 years of experience as a personal finance and legal writer. She has written for many publications including Forbes, Kilplinger, CNN, WSJ, Credit Karma, Insurify and more.
