It's time for Medicare Open Enrollment. In the weeks between October 15th and December 7th, all current Medicare beneficiaries will have to make some important decisions about their 2025 coverage.
Even if you're completely satisfied with your insurance coverage this year, there are big changes coming up that could cost you dearly if you don't take action. Here are two important things to check and some advice.
Part D drug coverage
For the first time, Medicare has capped out-of-pocket costs for drugs at $2,000 per year. Those in the Part D drug program should check their coverage next year. I brought this up first because everyone with some form of Medicare will have their prescriptions covered in 2025, even if they have a Medicare Advantage plan that includes drug coverage. You need to find out if and how it will be covered.
The fact that you can't spend more than $2,000 on drugs next year means plan providers will remove some drugs from formularies, charge higher copays for others, and offer only generic drugs. It means that. You can also switch Advantage plans for next year based on your drug coverage.
Visit Medicare.gov and enter your prescription and dosage using the PlanFinder tool. This information is stored in your “My Medicare” account, so you only need to update your changes each year. Next, carefully check that you are covered and that your pharmacy is included. This year, there's a new prescription payment plan that you can sign up for and spread out your payments in case you hit the $2,000 limit in the first few months.
Important: You must sign up for Part B even if you are not currently taking any medications to avoid future cumulative penalties if you eventually need coverage.
Advantage vs. Traditional Medicare
This open enrollment period is also one window to switch from Original Medicare to a Medicare Advantage plan (or back to traditional Medicare, with some limitations). You can also switch Advantage plans based on new pricing, included networks, drug coverage, and updated Medicare star ratings.
Longtime readers of this column know that I warn you every year against taking Advantage if you can afford Original Medicare. These costs can add up because they include Part B premiums, supplements, and separate Part D drug plans.
And that's why Advantage plans have captured half of the Medicare market in recent years. They offer low (or no) monthly premiums and “extra” benefits like dental and hearing coverage. But what may not be so obvious is that you are limited to a network of hospitals and doctors and must get pre-approval for all tests and procedures. If you are traveling or are a snowbird, you must return home for in-network care, except in emergencies.
Because Advantage plans receive a certain amount of reimbursement from the government for each beneficiary, these plans incentivize cost savings by limiting services. The difference is their benefit. That covers the cost of commercials and commissions from brokers and salespeople for their plans.
As costs rise, profits fall. And the same goes for stock prices. Humana's stock price has fallen by nearly half this year after the company announced a sharp drop in profits last winter. Most recently, Medicare downgraded the star rating of Humana's largest Advantage plan for 2025, meaning less government reimbursement and further pressure on profits. The logical conclusion is that testing and service approvals will decrease.
Medicare Advantage plans rejected 3.4 million, or 7.4%, of 46 million prior authorization applications in 2022, according to JAMA's latest statistics. Physicians are leaving the network, fed up with the second-guessing and resulting red tape. And do you want to be a patient when a prescribed test is denied by a managed care Advantage plan representative or an AI model?
Your Advantage plan will remain in effect as long as you are well, and your plan will continue to include your doctor and hospital. However, things change completely when you get sick or have an accident. In 2024, in-network out-of-pocket costs will be up to $8,850 per year. If you get sick and have to pay that amount, the “benefits” of low or no monthly premiums and two free teeth cleanings quickly disappear. !
If you're thinking of going back to Original Medicare, think again. If you have a pre-existing health condition, you are not guaranteed coverage under Plan G, the most comprehensive supplement, as if you signed up for traditional Medicare within six months. So do your research on supplements before going back. That being said, even supplements with lower coverage may be preferable because they give you more freedom in your care choices.
It's insane that seniors have to do all this research work to develop a medical plan when they're most likely to need it. The only place you can do your own research is www.Medicare.gov. Here's a surprisingly logical and helpful process for comparing supplements and Part D programs based on your state of residence, cost, and coverage. You can also contact the State Health Insurance Assistance Program at www.shiphelp.org.
Now is the time to pay attention to Medicare. Otherwise, you will definitely pay later. That's the brutal truth.
(Terry Savage is a registered investment advisor and author of four best-selling books, including The Savage Truth About Money. Terry answers questions on his blog at TerrySavage.com.)
