For people with Medicare, if ever there was a year to take its Open Enrollment (Oct. 15 to Dec. 7) seriously and choose coverage carefully, this is it.
“It's going to be challenging,” says Philip Moeller, author of the newly revised and updated “Get What’s Yours for Medicare: Maximize Your Coverage, Minimize Your Costs,” coming out Oct. 8.
And, Moeller tells Fortune, don’t assume that the Medicare plans you have in 2024 will necessarily offer the same coverage and costs in 2025. “I think such assumptions are dangerous,” he notes.
Yet, according to a recent analysis by the KFF health care research service, 69% of people with Medicare and 82% of those 85 and older didn’t compare their coverage options during a recent Open Enrollment period.
Open Enrollment is when Medicare beneficiaries can join, switch or drop a Part D prescription drug plan for the year ahead. Or they can do the same for a private insurer’s Medicare Advantage plan (the alternative to Traditional Medicare plus a Medigap supplemental plan); some Medicare Advantage plans include Part D drug plans.
It’s also when someone with a Medicare Advantage plan can switch to Traditional Medicare, though there’s a catch as you’ll see below. (There’s another Open Enrollment period from January 1 to March 31 just for people in Medicare Advantage plans who want to switch plans or switch to Traditional Medicare.)
The average Medicare beneficiary can choose from 21 standalone Part D plans and 43 Medicare Advantage plans, according to KFF.
Below, Fortune spoke with Moeller, who offers his advice on how you can make smart choices for 2025 coverage.
Fortune: Why will this Open Enrollment be challenging?
Philip Moeller: Provisions in the 2022 Inflation Reduction Act set in motion a number of changes in part D drug plans whose largest impact will be in 2025.
The most notable is the $2,000 out-of-pocket limit on drug costs. For people who take expensive drugs, it's a godsend. However, the insurance companies are going to be trying to do whatever they can to recover those foregone revenues. So, this is going to trigger a number of possible changes in Part D plans.
Fortune: Like what?
Moeller: We don't know the details yet. They won't be announced [by the Part D plans] until early October … The concerns I have, on behalf of consumers, are that some Part D plans will drop coverage of certain medications.
For instance, very expensive medication I take will no longer be in my Part D plan’s formulary [the list of drugs covered by a Part D plan] next year. I'm going to have to look for either a different drug plan or maybe even a different drug in order to meet my needs.
Fortune: How else could Part D plans be changing due to the $2,000 cap?
Moeller: Annual deductibles may go up, copays may go up, drugs may be moved from one tier [of the formulary] to a more expensive tier.
The cumulative result of this is that people really need to use Medicare's Plan Finder, the online tool Medicare offers. It'll look at the various Part D plans and then give you ballpark estimates of the annual cost of these plans for the drugs that you take.
I tell people: ‘Would you like to spend half an hour to save several hundred dollars?’ They nod, and then they don't do it.
Fortune: Another change for Part D plans in 2025 is the new Medicare Prescription Payment Plan. Can you explain it?
Moeller: This was a provision in the Inflation Reduction Act to even out the financial consequences of drug spending with Medicare by spreading the cost of medications over the year.
Insurance companies are supposed to administer this program. Your pharmacy is not going to collect the money. I think it's going to create a lot of confusion that people are going to have to wrestle with in 2025.
Fortune: People may not know that if they sign up for the payment plan, they're going to be getting two bills from their health insurance plan every month: One is their bill for the medications and the other is for the premium. Anything you want people to know about that?
Moeller: It is something for people to be sensitized to. It may further advantage the Medicare Advantage plans, which have the virtue of one-stop shopping.
Fortune: Another change people should think about during Open Enrollment is that starting next year, Traditional Medicare will no longer cover telehealth visits unless you're in a rural area. Medicare Advantage plans will be able to. What should people know?
Moeller: Medicare covered telehealth in the pandemic, but that coverage expires in 2024. I think it's a bad thing.
I think telehealth has proven really valuable to people. I don't really know how [the change in telehealth coverage] is going to shake out.
Fortune: Medicare just started a program for insurers designed to keep Part D premiums from rising due much due to the $2,000 cap. What do you think will be the result?
Moeller: I think they will make the increase in standalone Part D plan costs less of an issue for people next year. Medicare advantage plans can use subsidy payments from the government to offset the cost of coverage and they do so substantially with their Part D drug plans.
Fortune: Insurers say some Medicare Advantage plans have been financially squeezed lately. How will that affect the availability of the plans for 2025?
Moeller: For the first time in more than a decade, the bloom is off the rose for Medicare Advantage plans. Usage has returned to high levels following the pandemic. Medicare Advantage plans are facing headwinds in terms of profitability in certain parts of the country.
As a result, some insurers are pulling out of Medicare Advantage markets around the country. I think consumers have to be vigilant in terms of looking carefully at whether their current coverage is still going to be the coverage they want next year.
Fortune: When you combine the economic conditions for Part D plans and Medicare Advantage plans, what does it all mean for people during Open Enrollment?
Moeller: I think consumers will need to pay a lot more attention they have in the past because the consequences of not doing so are going to be severe. You could wake up January 1 next year and say, "Oh, my drug's not covered by my Part D plan anymore." Or "My Medicare Advantage plan responded to financial pressures by shrinking its network of authorized care providers."
Fortune: Are you expecting to see Medicare Advantage plans cutting benefits altogether? Or trimming them? Or just charging more for them?
Moeller: Yes, yes, and yes.
You’re going to have to do your homework to see whether those benefits have been reduced.
Fortune: Will we still see $0 premium Medicare Advantage plans for 2025?
Moeller: It's expected that most Medicare Advantage Part D plans will still have $0 premium plans in 2025, which are very attractive to people and, in some respects, will make Medicare Advantage plans more attractive.
Fortune: A key decision people will have to make during Open Enrollment is should they go with Traditional Medicare and a Medigap plan or go with Medicare Advantage? How should they make that decision for 2025?
Moeller: If you have Traditional Medicare, you should look at your Part D coverage and see if you can improve upon it or if you should switch to Medicare Advantage with a Part D plan.
Medicare Advantage plans have out-of-pocket maximums that can protect people from catastrophic costs; that's the role Medigap plays in Traditional Medicare.
There's no question that traditional Medicare plus a Medigap plan is costlier than a Medicare Advantage plan. The questions are: What would your overall out-of-pocket costs be and will your coverage provide the kind of guarantees you need?
I say in the book that for people who are middle-income and up financially, I think Medicare and a Medigap plan is the best combination of coverages. For others, especially lower- income people and younger retirees who have minimal health care costs, I think Medicare Advantage can be a very attractive alternative.
Fortune: But some people can run into trouble if they want to switch from a Medicare Advantage plan to Traditional Medicare and a Medigap plan. Can you talk about that?
Moeller: If you want to move from Medicare Advantage to Traditional Medicare, you may have trouble getting a Medigap plan under the same advantageous terms you do when you first become eligible for Medicare.
Medigap has guaranteed-access rights that only last six months following your eligibility for Medicare.
So, if you think you want to shift from Medicare Advantage to Traditional Medicare, look at Medicare’s Plan Finder and the Medicare supplement plans there. Then, get in touch with them and find out: ‘Would you cover me if I switch back and what would you charge me?’
Fortune: What about using a Medicare agent or broker to buy a Part D plan, a Medicare Advantage plan, or a Medigap plan?
Moeller: Don’t be too resistant to deal with an insurance broker. Just be aware that the insurance broker works for himself, not you, and that the policies he gives you access to may not be a total reflection of all the plans you could have access to.
Fortune: What about when people should make their Medicare Open Enrollment decisions? I just got my Part D Annual Notice of Change statement and it said the insurer wouldn’t reveal which drugs are on its formulary until mid-October.
Moeller: I urge people to take their time. Wait until November 15th to make an informed decision.
More on Medicare:
- Protecting Medicare a top concern for more than half of Americans in 2024 presidential election
- 3 big changes coming to Medicare in 2025. Here’s what they'll mean for you
- What Medicare beneficiaries need to know about generic medications
- Medicare has a new pilot program to help people with dementia. Here's how it works
- If you are denied coverage by Medicare, you have the right to appeal the decision. Here's how
