Medicare Updates 2025
Are you being bombarded with TV commercials, phone calls and text messages about Medicare Advantage plans? This happens every year during this time, also known as Medicare Open Enrollment period (October 15 to December 7) when you can change your Medicare plan
If you are currently on Medicare, it is important to review your current plan and compare it with the 2025 options for health care and prescription drug plans. Even if your current plan served you well this year, there may be a better plan for your needs in 2025. This is especially important for your Part D prescription drug plan.
The easiest way to compare options is to go to the official source for Medicare: Medicare.gov or call 1-800-MEDICARE. Another option is www.SHIPHelp.org, the state insurance commissioners' help site staffed by trained volunteers. If you live in Massachusetts, contact the SHINE program (Serving Health Information Needs of Everyone), a state health insurance assistance program: shinema.org. Medicare options depend on your state of residence, and you need state-specific advice you can trust.
WHAT HAS CHANGED FOR 2025?
Higher Costs for Medicare Part A
Part A covers inpatient care at hospitals and skilled nursing facilities as well as hospice and some home health care. If you are among the majority of Medicare beneficiaries who paid Medicare payroll taxes for at least 40 quarters, the Part A premium is free. For the few people who must pay a monthly Part A premium, the premium = $518 monthly (+$13 increase $505 in 2024). While there are no Part A premiums for most, there is a deductible owed when admitted to the hospital:
- Day 1 to Day 60: The 2025 deductible is $1,676 a stay in 2025 (+$44 from $1,632 in 2024).
- Day 61 to Day 90: The daily coinsurance amount rises to $419 (+$11 from $408 in 2024).
Medicare Part B Premiums Increase
Medicare Part B covers doctor’s visits, routine cancer screenings, home health care and other outpatient services. The Centers for Medicare and Medicaid Services (CMS) has announced higher Plan B premiums. The standard monthly premium (paid by about 92% of Medicare beneficiaries) will increase by $10.30 per month to $185 for 2025. However, if a beneficiary has annual individual income >$106,000 (defined as Modified Adjusted Gross Income, or MAGI), they will pay a higher monthly premium.
Higher Part A and Part B Annual Deductibles
The annual deductible for all Medicare Part B beneficiaries will increase from $240 in 2024 to $257 in 2025. Medicare beneficiaries typically pay 20 percent of the cost for each Medicare-covered service or item after they’ve met their deductible.
Note: If you have not enrolled in Medicare Part B yet, the penalty for failing to enroll at age 65 is a permanent 10% of the monthly premium multiplied by the number of years you could have enrolled but didn't. Exceptions are made for those with coverage through a qualifying employer health plan.
Changes to Part D
Part D refers to standalone prescription drug coverage through private insurers. If you have a Medicare Advantage plan with prescription drug coverage, you don't need Part D. If you elect original Medicare and want medications covered, you will need a Part D plan.
Beginning in 2025, Part D plans participants will pay no more than $2,000 in out-of-pocket costs. This cap will be indexed to growth in per capita Part D costs, so it may rise in future years. Part D enrollees may also spread out their out-of-pocket costs over the year rather than face high out-of-pocket costs in any given month.
The average monthly premium for a stand-alone Medicare Part D plan (prescription drug coverage) is projected to decrease from $41.63 in 2024 to $40 in 2025. (Note: some plan premiums will increase.) Just like Part B premiums, some high-earning beneficiaries will pay higher monthly premiums depending on their annual income.
It is VERY important to review potential Part D plans to ensure that your specific drugs are still covered at a reasonable cost. Some insurers have reorganized their plans, removed certain drugs, and changed the “tier” levels for drugs in response to the out-of-pocket cost cap.
Medicare Advantage (Part C) vs. Medigap Plans
Medicare Part C/ “Medicare Advantage”
Medicare Advantage beneficiaries are covered for Parts A and B through private insurers instead of traditional government-administered Medicare. Most Advantage plans include prescription drug coverage. For 2025, the average monthly premium = $17.00
Medicare Advantage plans offer hearing and dental benefits and very low monthly premiums (much lower than Medigap plans). However, these are "managed care" plans with strict limitations on which healthcare providers you can use. Most require pre-authorization for services. Advantage plans work well when you are healthy. But their limitations become clear when you become ill and seek the best services, second opinions, and innovative procedures. In recent months, several insurers, including Humana and CVS, announced plans to pull out of unprofitable markets and reduce service in others. Medicare Advantage customers in these markets will have to find another plan or return to Original Medicare.
Medigap/ Supplement to Original Medicare
The other option for Supplemental coverage is commonly referred to as Medigap. It is private insurance which supplements original Medicare coverage. Medigap plans cover part or most of the cost sharing (such as coinsurance and co-payments) for Parts A and B, depending on which Medigap plan you choose. Medigap plans typically have higher monthly premiums than Advantage plans. but lower out-of-pocket expenses.
You can select any Medigap plan available in your area within six months after you initially sign up for Medicare Part B. But after that, Medigap insurers in almost all states (but NOT Massachusetts!) can reject you or charge more based on your health and preexisting conditions. Delaying enrollment in a Medigap policy can lead to higher premiums and denial of coverage in most states. You may change Medigap plans each year as your health needs change.
If you have questions about year-end planning, reach out to a financial professional. If you are not currently working with FPS, we would be happy to talk with you. Questions? We are here to help.
Want to schedule a quick call with me? Click HERE
Click HERE to receive our award-winning newsletter.
Best regards,
Janet Rhodes Friedman, CFP®, CDFA®, MBA
Janet@PlanWithFPS.com
617-630-4978
Financial Planning Solutions, LLC (FPS) is a Registered Investment Advisor. Financial Planning Solutions, LLC (FPS) provides this blog for informational and educational purposes only. Nothing in this blog should be considered investment, tax, or legal advice. FPS only renders personalized advice to each client. Information herein includes opinions and source information that is believed to be reliable. However, such information may not be independently verified by FPS. Please see important disclosures link at the bottom of this page.