By Daniel Korleski, MBA
The Inflation Reduction Act of 2022 brought several major changes to Medicare, particularly impacting Part D, which covers prescription drug plans. Starting in 2023, insulin costs were capped at $35 per month, and the current administration has continued efforts to lower prices for some of the most expensive medications.
Looking ahead to 2025, more changes to Medicare will be implemented. Here’s a breakdown of what’s coming and how it could impact your finances.
Annual Cap on Your Part D Out-of-Pocket Expense
Starting in 2025, those with Part D plans will not have to pay more than $2,000 per year in co-pays, deductibles, and coinsurance. The cap could rise, though, and will be indexed to the growth of the per capita Part D costs each year. This also applies to those enrolled in Medicare Advantage plans. Enrollees in Part D who are in the catastrophic category and take only brand-name drugs will see their cap drop from about $3,300/year to $2,000 as well.
Part D participants will also have the option of spreading out their co-pays over the year instead of having to pay a large lump sum in a given month, which could ease personal cash-flow concerns.
Simplification and Elimination of the “Donut Hole” Gap
Currently, an enrollee in Part D first pays the full cost of their drugs up to their deductible ($545). After this, copayments are required that vary with the type of medication prescribed. From there, enrollees face the dreaded “donut hole,” or gap in coverage where a covering plan pays less for brand-name drugs and you have to make up the rest until you reach the cap.
In 2025, the deductible may be $590, but there is no “donut hole.” After the deductible is met, co-payments are then required up to the cap of $2,000 per year, but there will be no coverage gap in between. In addition, enrollees will no longer deal with changes to cost-sharing for specific drugs when they progress from initial coverage to the coverage gap phase. Depending upon the medication needed, this could represent significant savings. Also, Medicare Part D and the drug companies themselves will bear more of the cost beyond the cap.
Changes to Medicare Advantage Plans
Healthcare insurers are prone to emphasizing the added features and benefits of Medicare Advantage (MA) over Traditional Medicare, including dental, vision, and fitness supplemental programs, to entice new enrollees to MA plans. However, recent studies indicate that only 30% of these benefits are actually used, resulting in costly waste to the program. To help address this, starting in 2025, MA plans will be required to send their participants a personalized Notification of Unused Supplemental Benefits during July of each year.
While it is not expected that MA programs will adjust premiums, there may be changes to the list of covered medications, reductions to program out-of-pocket spending limits, increases to extra service charges, or reductions in other benefits.
There will also be stricter rules governing sales of Medicare Advantage plans by brokers and agents. New rules will prohibit incentives, such as large bonuses and other perks, to agents selling Medicare Advantage plans. Compensation limits will be imposed to combat aggressive sales practices.
Increased Benefit for Dementia Patients and Caregivers
Implemented in 2024, the Guiding an Improved Dementia Experience (GUIDE) program provides 24/7 support, medical and community services assistance, and caregiver training to help dementia patients and their caregivers, along with $2,500 in financial assistance for at-home, overnight, or adult day care expenses. This program’s coverage will expand four-fold in 2025 to help more patients (only those enrolled in Traditional Medicare) across the country.
Weight-Loss Drugs May Be Easier to Obtain
Weight-loss drugs are not covered by Medicare, but when prescribed to help with other medical conditions, such as Type II diabetes, these medications might fall under Part D coverage. In 2025, more such prescriptions may be covered if the FDA approves them for conditions other than weight loss, such as serious heart and cardiovascular conditions, diabetes, and sleep apnea.
Watch for Changes to Your Plan
It’s expected that premiums, copayments, and covered drugs could vary widely during Medicare Open Enrollment beginning October 1st. Be sure to look closely at changes to your plan that were published in September and compare those to other options available using the Medicare Plan Finder.
Partner With a Seasoned Professional
Optimizing your Medicare benefits is a key part of effective retirement planning. Pursuing your financial goals requires a holistic approach that accounts for every aspect of your financial situation. At Cobalt Private Wealth, we can help you create a personalized Medicare strategy that aligns with your specific needs. To get started today, reach out to me at danielkorleski@cobaltprivatewealth.com or 719-332-3863 to schedule a meeting.
About Dan
Daniel Korleski is the President & CEO for Cobalt Private Wealth, where he helps his clients grow, manage, and protect their wealth so they can work toward a stronger financial future. With over 30 years of experience in the financial services industry, Dan has served as the managing director for Investment Trust Company, chief investment officer for the Wealth Management Group at American National Bank in Denver, and regional investment manager for the Greater Colorado Region of the Private Bank at Wells Fargo, where he oversaw the management of over $2 billion. In 2008, he was appointed by the mayor of Colorado Springs to the City’s Investment Advisory Committee. Dan holds an MBA in investment management from Midwestern State University in Wichita Falls, Texas, a Bachelor of Science in Finance from Florida State University, and is a member of both the CFA Society Colorado and The Financial Planning Association.
Dan loves to give of his time to his community and is currently serving as the Board Chair of Catholic Charities of Central Colorado and oversees the Homebound Ministry at St. Paul Catholic Church. He has also served as Chair of the Board of Trustees of Pikes Peak Hospice Foundation, President of the Broadmoor Rotary Club, and Vice President of the Board for the Pikes Peak Chapter of Trout Unlimited. Dan was born and raised in Spain and is fluent in Spanish. To learn more about Dan, connect with him on LinkedIn.
