It’s Time to Shop for Medicare, and 2025 Brings Big Changes

Part D prescription drug protection is much stronger, but pay close attention to changes in premiums and out-of-pocket costs. In Medicare Advantage, it's even more complicated.

Some big, positive changes are coming to Medicare next year.

The program’s prescription drug insurance will be much stronger — and easier to understand — as a result of the Inflation Reduction Act of 2022.

But the changes make it all the more important to review your coverage options during Medicare’s annual enrollment period, which is happening now and runs through Dec. 7.

Prescription drug and Medicare Advantage plans are revising their offerings more than usual for 2025 because of changes prescribed by the law. The legislation strengthens prescription drug coverage substantially by simplifying cost-sharing and imposing a hard $2,000 cap on total out-of-pocket spending for drugs covered by your plan.

The law will provide thousands of dollars in relief to beneficiaries who take high-cost drugs for conditions such as cancer and multiple sclerosis, and it will give seniors greater predictability in planning their health care spending.

But the plan you’re in for 2024 may not be the best fit next year. Your premium and deductible might actually rise as insurance companies react to the changing rules, and the plan’s list of covered drugs might change.

I examine the changes in my latest Retiring column for The New York Times.

A few additional points for newsletter readers:

• If you’re a long-time reader, you know that I have a preference for traditional Medicare. If you are enrolled in traditional Medicare, don’t fall for the marketing pitches aiming to convince you to shift to Advantage. As noted in the Times story, if you do that and drop your Medigap, you may not be able to get one later if you change your mind. Consumer advocates say that they often hear from Medicare Advantage enrollees who want to get out of their plans when they encounter a serious illness and come up against the restrictions and bureaucratic hassles in these plans.

• The prescription drug changes underscore a long-standing flaw in the Medicare Advantage program. Many of these plans wrap in prescription drug coverage - and that coverage will be more expensive, on average, in 2025. But enrollees must find a best-match not only for drugs, but provider networks.

• Only about one-third of Medicare enrollees bother to do a coverage check-up during annual enrollment. But the list of covered drugs and Advantage provider networks can change from year to year. And the numbers tell us that check-ups are especially rare among Medicare beneficiaries over age 80. If you know people in that age group, it makes sense to prod them to do a check-up, or help them with it yourself.

• The Inflation Reduction Act of 2022 didn’t happen by immaculate conception. It was championed by the Biden administration and Democrats in Congress, and didn’t receive even a single Republican vote. I suspect one reason so many Americans don’t think government does anything to help them is that we in the media fail to provide context and reminders. This law was passed two years ago, and it took some time to phase in the key changes. Result: your drug coverage just got much stronger.

ICYMI: How Trump or Harris would address Social Security’s problems

The next president and Congress will need to tackle the financial challenges facing Social Security if we’re going to avert a sharp cut in benefits to the 68 million retired or disabled Americans who rely on the program.

Social Security’s combined retirement and disability trust funds are on track to be depleted in 2035, according to the program's trustees. If we reach that point, we will be confronting a drastic across-the-board benefit cut of roughly 17%.

How would the two major-party candidates for president handle the problem? I studied the tea leaves in last week’s newsletter.

What I’m reading

Older savers can now super-size their 401(k) accounts . . . Across party lines, protecting Social Security is a top voter priority . . . How undiagnosed cognitive decline eats into seniors’ savings . . . In retirement, it’s time to put our spending under the microscope . . . Some final personal finance advice from Jonathan Clements . . . Is ageism on the menu at restaurants?