Medicare changes in 2025: Key updates to share with clients

10/09/2024 — Key takeaways:

• Adjustments to premiums for Medicare Parts B and D are slated for 2025.
• The Part D “donut hole” is going away, but a new $2,000 out-of-pocket cap will be introduced.
• Potential changes to Medicare Advantage plans include funding increases, potential premium increases, possible alterations in covered services, network changes, or modifications to cost-sharing arrangements.

Significant changes are coming to Medicare in 2025 and clients are looking to financial professionals to help them navigate these updates. According to a 2024 Nationwide Retirement Institute survey, 69% of those surveyed said if a financial professional couldn’t help them navigate their Medicare choices, they would probably switch to one who could. From adjustments to income-related premiums to the elimination of the Part D “donut hole,” understanding these changes can be crucial for advising your clients effectively. Here’s a detailed breakdown of the key Medicare changes for 2025 that you should be aware of.

The Medicare Part D “donut hole” is going away

One of the major changes slated for 2025 that’ll affect many of your clients involves the end of the “donut hole,” a coverage gap in Medicare Part D prescription drug plans. Currently, after reaching a certain spending limit, beneficiaries have to pay a larger share of their prescription costs until they hit the catastrophic coverage threshold, leading to high out-of-pocket costs. 

Here’s what’s changing in 2025:

• Simplified cost structure: Currently, after reaching the initial coverage limit, beneficiaries enter the donut hole and must pay a higher percentage of drug costs. In 2025, this step will be eliminated. Instead, they’ll pay a fixed 25% of their drug costs from the time they meet the deductible until they reach catastrophic coverage. 
• New out-of-pocket maximum: A new $2,000 out-of-pocket cap will be introduced in 2025, limiting the total amount beneficiaries pay for their prescriptions annually.

These changes will mean simplified payments for clients, since they no longer have to calculate varying percentages of drug costs as they move through different phases of Part D coverage, and more predictable expenses with the 25% payment structure.

Potential changes to Medicare Advantage plans to look out for

Medicare Advantage (MA) plans are likely to see several changes in 2025, which could include funding (and possibly benefit) increases, potential premium increases, alterations in covered services, network changes, or modifications to cost-sharing arrangements.

What to look out for:

• Funding and benefits: Increased funding may result in enhanced benefits, providing better coverage options for clients.
• Premium adjustments: You may want to prep clients for possible premium increases and help them explore the best MA plan options available.
• Coverage modifications: Changes in covered services and network arrangements might require clients to switch providers or adjust their expectations regarding their healthcare plans.

Income related premiums are changing for Parts B and D

Adjustments to the income-related premiums for Medicare Parts B and D are slated for 2025. These updates are designed so that higher-income beneficiaries contribute their fair share toward their health care costs. 

Planned changes include:

• Updated income brackets: The income thresholds for determining who pays higher premiums will be updated. These brackets are based on beneficiaries’ modified adjusted gross income (MAGI) and are reviewed annually. 
• Premium increases: Higher-income beneficiaries will notice increases in their premiums for both Medicare Part B (which covers doctor visits and outpatient care) and Medicare Part D (which covers prescription drugs). The exact increase will depend on their income level.

There’s a new notification planned for unused benefits

Starting in 2025, Medicare Advantage policyholders will receive a midyear notification reminding them about any unused supplemental benefits in their plans. The purpose is to help beneficiaries maximize their plan benefits and take full advantage of available services. You can encourage clients to make the most of their unused benefits to help maintain their health and lower future health care costs.

Preparing for Medicare changes in 2025

1. Review client portfolios and assess how the upcoming changes may impact your clients’ current and future healthcare costs. This includes reviewing their income levels and potential adjustments to income-related premiums.
2. Educate clients by keeping them informed about the changes to Medicare, particularly the simplified cost structure and the new out-of-pocket cap for Part D. Providing clear, concise information will help them understand and prepare for these adjustments.
3. Evaluate Medicare Advantage plans and help clients choose the plan that best meets their needs. Consider factors such as premium costs, coverage options, and network changes.
4. Plan for notifications by encouraging clients to pay attention to the new midyear notifications for Medicare Advantage policyholders. These reminders can help them make the most of their supplemental benefits and ensure they receive comprehensive coverage.

Be a trusted Medicare resource

The Medicare changes coming in 2025 present both challenges and opportunities. By understanding these updates and proactively preparing for them, you can provide valuable guidance and support to your clients, helping them manage their healthcare costs and make informed decisions about their coverage. By staying ahead of the curve, you’ll reinforce your role as a trusted advisor and strengthen your client relationships.