Medicare 2025: Why It Matters to Shop Around
The estimated cost of healthcare in retirement for the average American couple is $41,000. So, planning for the best possible coverage of medical expenses is a major part of successful retirement planning. Understanding the Medicare changes in 2025 is vital so you can plan your healthcare and financial future.
Medicare open enrollment season is always critical for seniors to review their healthcare plans, but it’s especially important this year. Major changes to Medicare Part D and Medicare Advantage plans are set to take effect in 2025, so it’s vital to understand what these changes mean for your health care and financial future.
Unfortunately, many Medicare beneficiaries don’t take full advantage of open enrollment.
Research shows that 69 percent of Medicare beneficiaries didn’t compare their Medicare coverage with other options offered in their area.
Many people may be unprepared for changes directly impacting their health coverage and financial well-being in light of the upcoming reforms.
“We believe that understanding your Medicare options and how these changes affect you is crucial to ensuring both your health and financial security,” says Patricia Klein Assistant Branch Manager, David Lerner Associates. “With all these changes coming, Medicare open enrolment for 2025 is an especially critical time to review your plan, even if you’re happy with your current coverage.”
The $2,000 Out-of-Pocket Cap on Medicare Part D
One of the most significant changes taking place in 2025 is the introduction of a $2,000 out-of-pocket cap for Medicare Part D prescription drug plans. This long-awaited reform will offer financial relief to millions of seniors who rely on prescription medications to manage chronic health conditions.
Currently, Medicare Part D does not cap out-of-pocket expenses, and seniors with high prescription drug costs can spend thousands of dollars annually on medications. The new cap will be a welcome change, especially for those dependent on expensive medicines.
Why This Cap Is a Game-Changer
For many Medicare beneficiaries, out-of-pocket prescription drug costs have been a growing financial burden. In 2022, high costs forced 20 percent of U.S. adults age 65 and older to skip or delay filling a prescription and miss or reduce doses. Some even resorted to using someone else’s medication.
The new cap will effectively limit out-of-pocket spending to $2,000 per year, reducing the financial strain for many seniors.
However, it’s important to understand that this cap only applies to drugs that are covered by your Medicare Part D plan. Each plan has its own formulary, which is the list of medications it covers.
Plans can change the medications they cover every year, so while the cap is a positive step, it doesn’t mean that all your medications will necessarily be covered at the same cost. That’s why reviewing your plan annually during open enrollment is essential to ensure your medications are still covered.
Why It’s Time to Pay Extra Attention to Medicare Advantage Plans
Medicare Advantage (also known as Part C) is an increasingly popular option among Medicare enrolees, with over 31 million Americans enrolled in these plans as of 2023.
Medicare Advantage plans offer al the benefits of Original Medicare (Part A and Part B) but typically include additional coverage, such as dental, vision, and prescription drugs, all bundled into a single plan. However, private insurers provide Medicare Advantage plans, and significant changes are coming in 2025 that could affect your coverage.
- Switch to another Medicare Advantage plan in your area.
- Return to Original Medicare (Part A and Part B).
If you do nothing, you will automatically be returned to Original Medicare. While this ensures you won’t be without coverage, returning to Original Medicare may not be the best option for everyone, especially if you’ve grown accustomed to the additional benefits offered by your Medicare Advantage plan.
Why You Should Consider Medigap If You Return to Original Medicare
Suppose your Medicare Advantage plan is discontinued and you choose to return to Original Medicare. In that case, you will have another opportunity to enrol in a Medigap (Medicare Supplement Insurance) plan without medical underwriting. Medigap helps cover the gaps in Original Medicare, such as copayments, deductibles, and coinsurance, which can otherwise add up quickly.
Ordinarily, the best time to enroll in a Medigap plan without being subject to medical underwriting (which could increase your premiums or result in denial of coverage due to preexisting conditions) is during your Medigap open enrollment period.
This six-month window begins when you are both 65 years old and enrolled in Medicare Part B. After this period, enrolling in a Medigap plan typically requires medical underwriting. However, the 2025 rule change offers a rare second chance for those whose Medicare Advantage plans are ending, allowing them to secure Medigap coverage without facing medical underwriting, which is an opportunity worth considering.
Steps You Should Take During 2025 Open Enrolment
Here are a few steps to help ensure you’re making the best decisions for your health care and financial future:
- Review Your Current Plan: If you’re enrolled in a Medicare Advantage or Part D plan, carefully review your plan’s Annual Notice of Change. This document outlines changes to your premiums, coverage, and formulary for the upcoming year.
- Compare Plans: Medicare Advantage and Part D plans change their coverage each year. Use Medicare’s Plan Finder tool or consult with a financial advisor to compare plans available in your area. Pay close attention to any changes in the drugs covered by your plan’s formulary and any additional benefits such as dental or vision coverage.
- Evaluate the $2,000 Cap: While the new cap on Part D out-of-pocket spending is a big win, it’s important to check whether your medications will still be covered. If your prescriptions are no longer covered, the cap won’t help you.
- Check If Your Medicare Advantage Plan Is Discontinuing: If your Medicare Advantage plan is discontinued, you’ll need to act. Consider your options carefully: do you want to switch to another Medicare Advantage plan or return to Original Medicare and supplement it with a Medigap plan?
- Consider Medigap: If you return to Original Medicare, now is the time to explore Medigap coverage. Without medical underwriting, you can lock in supplemental coverage that will protect you from unexpected out-of-pocket expenses.
Take Control of Your Medicare Decisions in 2025
The changes to Medicare Part D and Medicare Advantage plans in 2025 represent significant reforms that will impact millions of retirees. Now is the time to thoroughly review your healthcare options.
At David Lerner Associates, we encourage clients to be proactive during Medicare open enrollment. Understanding your coverage, comparing your options, and anticipating how these changes affect your finances are crucial to ensuring a comfortable and secure retirement.
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.