Medicare Enrollment is Underway: Key Considerations for Choosing a Plan in 2025
The annual Medicare enrollment period is now open until December 7, and experts indicate that selecting a plan may be more challenging this year compared to previous ones for millions of seniors.
For the first time ever, the maximum out-of-pocket costs for prescription drugs will be limited to $2,000 per year, and all participants will have the option to manage these costs through capped monthly payments instead of paying everything in one go at the pharmacy. This is a positive development, especially for those who hit the cap—AARP predicts that in 2025, around 3.2 million Americans (approximately 8.4% of those with a Part D plan) will reach that limit.
However, to accommodate these changes, insurance providers are modifying their plans, which may lead to reduced benefits and increased expenses for many seniors, according to experts.
Some providers are discontinuing certain plans, leaving less lucrative markets, downgrading popular benefits like dental coverage, and raising costs such as deductibles, premiums, and co-payments that all Medicare participants incur.
“This year’s Medicare landscape will be the most confusing it has ever been,” stated Vijay Kotte, CEO of the Medicare marketplace GoHealth. “With fewer options, rising costs, and diminished benefits, older adults will have to navigate a tumultuous enrollment process this year.”
How Many Americans Are Affected?
- According to the Centers for Medicare and Medicaid Services (CMS), over 67 million Americans are enrolled in Medicare, divided between traditional Medicare and Medicare Advantage.
- Traditional Medicare, the federal insurance program, includes Part A for hospital care and Part B for physician services. For 2024, the monthly premium for Medicare Part B is set at $174.70, with potential increases for those with higher incomes.
Over 80% of those using traditional Medicare also purchase a Part D plan. Many additionally opt for a supplemental plan, known as Medigap or Plan G, which covers all out-of-pocket expenses like co-insurance and co-payments after meeting the annual deductible. Without this, Medicare leaves 20% of medical costs and prescriptions uncovered, and there is no cap on out-of-pocket expenses.
Advantages of Medicare Advantage Plans
- Medicare Advantage (MA) plans, offered by private insurers, often advertise $0 or low monthly premiums, but this typically refers to “no additional premium,” explained Cindy George, GoodRx’s senior personal finance editor. “You’re still responsible for your original Medicare Part B premium, which is usually deducted from your Social Security check,” she added. MA plans generally cover all three parts of Medicare and may include extra benefits like vision, dental, and hearing coverage or gym memberships. However, they do impose co-pays and co-insurance on nearly all services.
- Due to changes by insurers this year, approximately 6 million MA enrollees are expected to see a reduction in their plan benefits—marking a first in MA history, according to GoHealth.
- Around 1.3 million Americans enrolled in MA general plans will lose access to their current plans in 2025, necessitating a change in their Medicare coverage, as reported by America’s Health Insurance Plans (AHIP). This group includes an estimated 243,000 beneficiaries with MA general enrollment plans costing $0 in 2024 who will face premiums in 2025.
- The number of standalone Part D plans is set to decline by 26% in 2025 compared to 2024, according to KFF, a nonprofit health researcher, as insurers adapt to the $2,000 cap on out-of-pocket drug costs.
Searching for a New Plan
Mary Johnson, 73, is among those looking for a new drug plan. Currently enrolled in a popular Aetna Part D plan with a $5 monthly premium, her three generic medications have no co-pay before the deductible, amounting to about $63.60 for the year. However, this plan will be discontinued in 2025.
“In 2025, my most affordable option to switch to could lead to an increase in my premiums and out-of-pocket expenses by $476.00—a staggering 750% rise,” Johnson explained, citing the same three generic drugs she uses presently. Meanwhile, she pointed out that the Social Security cost-of-living adjustment for 2025 is only 2.5%.
What Should Americans Consider When Selecting a Plan?
To lower expenses, experts recommend the following:
- Sign up for an account on Medicare.gov, where you can input your medications, pharmacy information, and location to compare plans, providers, and medication costs. Mike Ramirez, associate director of financial planning at EP Wealth Advisors, suggests checking various nearby pharmacies to find the best drug prices since prices can vary between locations.
- If your drug costs remain unmanageable, explore assistance programs like Medicare’s Extra Help and Medicare Savings Programs (MSPs), or free discount initiatives like GoodRx, which may offer more savings than your prescription drug plan. Manufacturer discount cards are another option. Although using discounts like GoodRx will not contribute towards the deductible, individuals who don’t anticipate reaching their deductible may opt for these discounts; others should consider the balance between using discounts and their insurance to meet the deductible for cost sharing.
- Consult with a professional, such as an unbiased insurance broker who represents multiple companies, to find the best plan suited to your needs,” advised Cynthia Pruemm, founder and CEO of [insert name here].
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- Starting in 2025, individuals enrolled in Part D can choose to pay for their medications in monthly installments at no additional cost, a suggestion made by Brian Whorley, the chief executive of the health care software company Paytient.
Whorley explained, “This allows you to keep your money for longer periods.” He mentioned that if someone likes to check their bills monthly and prefers predictable expenses, this option could be beneficial.
High drug costs often lead people to either skip filling prescriptions or to ration their medication. Whorley stated that more manageable and predictable payments facilitate better budgeting, which in turn helps people remain consistent with their medications. Experts consulted by YSL News affirmed that there are no downsides to opting for this payment choice.
- If you’re thinking about switching to a Medicare Advantage plan due to its lower premiums, experts caution caution. According to Johnson, “If a Medigap policyholder cancels their coverage, it’s usually impossible to regain that policy if they decide to return later.”
While the out-of-pocket expenses for Medicare Advantage (MA) are limited each year, they can be quite high and are expected to increase in 2025, according to AHIP. The percentage of plans with out-of-pocket costs exceeding $5,000 is projected to increase from 46% in 2024 to 52% in 2025. In contrast, with traditional Medicare paired with a Medigap plan, the annual out-of-pocket cost consists solely of the Part B deductible, which is $240 in 2024.
Also, think about your travel habits and the available healthcare provider options in your area. Traditional Medicare is accepted by nearly all doctors and hospitals without the need for referrals. However, Medicare Advantage typically requires you to use in-network providers, and it may necessitate referrals and pre-authorizations for certain services. Pruemm mentioned, “Medicare Advantage could be more complicated for those who travel frequently since it necessitates staying within the network.”
Even if traditional Medicare combined with a Medigap policy may have higher monthly premiums, Brandon Hill, a senior adviser at Beckett Financial Group, reassured that “Plan G offers substantial benefits.” He advised that if the supplemental coverage is within your budget, you should consider getting it.
