If you’re on traditional Medicare with a Part D plan
The Part D changes have prompted insurers to raise premiums for many stand-alone drug plans as they move to cover higher expected costs. In response, the Biden administration offered a program designed to offset premium increases by subsidizing drug plans, and most insurers have signed on. But companies participating in this program can raise premiums as much as $35 per month, and premiums are jumping for some of the most popular plans, according to KFF, a health care research nonprofit.
But it’s critical to consider your total out-of-pocket costs for a plan, not just the premium. When you search for plans using the government’s Medicare Plan Finder, you’ll see not only premiums but projected total annual costs that include deductibles and cost-sharing (what you might pay after premiums). And starting next year, the law replaces what had been a confusing system of cost sharing with a new approach.
Along with their premiums, enrollees will pay a maximum deductible up to $590, and will then pay part of their drug costs up to the $2,000 ceiling. At that point, they will have no additional out-of-pocket costs.
However, plans are permitted to vie for your business by making more competitive offers, and most will have offers below the maximums, said David Lipschutz, co-director of the Center for Medicare Advocacy, a nonprofit group. “You might find plans with a lower or no deductible or a reduction in cost sharing or coverage of drugs that are not usually covered under Part D,” he said.
And, there’s a caveat to that $2,000 cap — it applies only to the drugs covered by your plan. That means it’s crucial to check your plan’s list of covered drugs (the “formulary”) to see if drugs you take are included — if not, shop for a new plan.
What if you’re prescribed a costly new medication next year that isn’t covered by the plan you select? You still have options. “The first thing we recommend is that people ask their health care provider if there’s an alternative medication that would work for you that’s included in your plan’s formulary,” said Casey Schwarz, senior counsel for education and federal policy at the Medicare Rights Center, a consumer and advocacy organization.
If there’s a medical reason for you to use the off-formulary drug, you can file an appeal requesting an exception. And if the appeal is rejected, another level of appeal is available that goes before an independent review firm hired by Medicare. “We see initial denials for exceptions requests that are overturned” if the person appeals to an independent review, especially when a patient has the support of the prescribing physician and medical documentation, Ms. Schwarz said.
Also new for 2025 is a Medicare Prescription Payment Plan option for enrollees who experience high out-of-pocket costs and struggle to pay before they reach the $2,000 cap. The plans will allow you to spread expected costs across the calendar year instead of paying in one lump sum. All Part D plans must offer these payment plan options.
But most experts consider the cap to be the most profound and positive change to the Part D program. About 4.6 million Medicare Part D enrollees had already reached $2,000 or more in out-of-pocket drug costs by the end of June this year, according to federal government data. Enrollees spending that much experienced especially high out-of-pocket spending on cancer drugs — but the cap is designed to guard against any unforeseen high-cost drug needs, said Tricia Neuman, senior vice president of KFF. “In any given year, you never know what your drug needs might be,” she said.
Along with saving money, the imposition of a hard cap will give Medicare enrollees more predictability and stability in their household finances, Ms. Schwarz said. “It allows people to more effectively plan for their entire financial life, especially folks on more limited and fixed incomes.”
If you’re on Medicare Advantage
Medicare Advantage is a managed-care alternative to the traditional program offered by insurance companies that combines Part A and B services, and often includes Part D prescription drug coverage and extra benefits like dental, vision and hearing coverage. The law’s prescription drug cost controls apply to them as well as to the stand-alone plans.
Next year brings an unusual amount of change for Advantage plans, which means it will be important for enrollees to check their coverage and possibly switch plans.
Many Advantage plans are revising their cost-sharing features. Sixty percent of enrollees in plans that include drug coverage will pay a drug deductible in 2025 if they make no changes to their coverage, according to KFF — a substantial increase from 2024 when 21 percent faced a drug deductible in these plans. (Some of these enrollees receive low-income subsidies that cover their deductible.) The average deductible in 2025 will be four times higher for these enrollees than in 2024 ($225 vs. $59) according to KFF.
Dr. Neuman cautions enrollees to look carefully for less obvious changes in drug coverage. “The list of covered drugs and the preferred pharmacy networks can all have a big impact on your coverage and costs,” she said.
Plan choice remains relatively stable — the average beneficiary will be able to choose among 34 Advantage plans that offer drug coverage, just two fewer than this year, KFF reports. Five percent of Medicare Advantage enrollees are in a plan this year that has been terminated for 2025, according to KFF. These enrollees will not be automatically assigned to another Advantage plan offered by that insurer. Another 7 percent of Advantage enrollees are in plans that are being consolidated by their insurers and will find themselves automatically moved into another plan from the same carrier.
Traditional Medicare or Advantage?
Insurance companies spend millions of dollars during annual enrollment promoting their plans with tempting pitches of extra benefits and lower costs. But surveys of beneficiaries find that the proportion of them who find their care affordable is no greater in Advantage than in traditional Medicare.
And, if you’re enrolled in traditional Medicare, switching to Advantage could be an irreversible move, because if you ever want to switch back, you may not be able to obtain Medigap supplemental coverage.
If you are in an Advantage plan that is terminated, you might qualify for a Medigap “guaranteed issue right” if the plan sponsor does not offer you a comparable option. When you first sign up for Part B, Medicare’s “guaranteed issue” rules forbid Medigap plans from rejecting you, or charging a higher premium because of any pre-existing conditions. But after that time, Medigap plans in all but four states (Connecticut, Massachusetts, Maine and New York) are permitted to reject your application or charge higher premiums.
How to shop for your coverage
Review your annual notice. Your plan provider is required to send you an Annual Notice of Change document each fall, either by mail or email. This will include the premium you’ll be charged in the coming year and the annual deductible. It will also tell you if coverage of your drugs will change or if changes are being made to your Medicare Advantage health care provider network.
Watch the tiers. Plans typically group drugs into a number of tiers, with lower-cost drugs like generics in the lower tiers. The change notice will show if a drug has moved from the first to the second or third tier; if that happens, you may face higher cost-sharing or bureaucratic hassles getting a drug covered.
Contact the SHIP. Each state has a State Health Insurance Assistance Program, which offers comprehensive and unbiased guidance on plan selection. The service is financed by the federal and state governments, and it provides free, expert help with Medicare. The nonprofit Medicare Rights Center offers a counseling hotline at (800) 333-4114.