Retirees recently found out their annual cost-of-living adjustment for Social Security in 2025, and now it's time to enroll for Medicare. Enrollment launched on Oct. 15 and will last until Dec. 7. Similar to Social Security, the Medicare program has many rules and can be complex. There will be several changes affecting Medicare that retirees should know about and be prepared for. Some are positive, while others can help you budget better for next year. With 2025 Medicare enrollment upon us, here are three benefits changes retirees should know about.
1. Medicare Part A and B premiums and deductibles are going up
The Centers for Medicaid and Medicare Services recently announced new monthly premiums for Medicare Parts A and B next year. Medicare Part B covers many common medical care services retirees might need, such as doctor visits, outpatient care, lab visits, mental health services, preventive services, and some medical equipment like wheelchairs.
Next year, the standard monthly Part B premium will increase by about 6% to $185. Meanwhile, the annual Part B deductible will increase by roughly 7.1% to $257. According to CMS, the changes are due to expected price changes and projected utilization increases, which are not unlike past years. Standard monthly Medicare Part B premiums and deductibles increased roughly 6% and 6.2%, respectively, this year.
Medicare Part A covers several inpatient and home health services, including skilled nursing facilities, hospice, and inpatient rehabilitation. Most retirees who get Medicare Part A will not pay premiums because they have worked at least 10 years of employment that covers Medicare. However, the deductible for admission into hospital care will increase by 2.7% to $1,676 in 2025. This covers inpatient care for 60 days, and then coinsurance amounts will be due. The deductible increased by 2% this year.
The out-of-pocket cap is for Medicare Part D, which helps Medicare enrollees cover the cost of prescription drugs they need. President Joe Biden's Inflation Reduction Act, signed into law in 2022, instituted the change, which will go into effect for the first time next year. There will be a $2,000 annual limit on what retirees spend on Medicare Part D-covered drugs. Covered expenses include deductibles, copayments, and coinsurance. The cap does not cover premiums.
Each Part D plan covers certain drugs. If there is a drug you need that's not on this list, you can file an appeal, request an exception, or pay out of pocket. Part D plans must cover a minimum of two drugs from most drug categories and any drug available in the categories below:
While it won't go into effect next year, the Biden administration also made changes that allow the government to negotiate with the drug companies. Recently, the White House announced that it's reached agreements with manufacturers on 10 drugs covered under Medicare Part D, which is projected to save Medicare enrollees roughly $1.5 billion in out-of-pocket costs. That's something to look forward to in 2026.
3. The end of the "Donut Hole"
The beginning of the $2,000 out-of-pocket cap ends the dreaded "Donut Hole" coverage gap that retirees covered under Medicare Part D often encounter. Essentially, retirees and their plans would pay for the first $5,030 of spending on Medicare Part D drugs. Then a coverage gap kicks in called the "Donut Hole," and retirees are left spending more out of pocket until they reach the $8,000 catastrophic coverage threshold.
In prior years, retirees in the "Donut Hole" paid 100% of out-of-pocket costs until they hit the catastrophic coverage threshold. They were also on the hook for 5% of remaining drug costs once they hit the catastrophic threshold. However, the 5% provision ended this year. Retirees this year are also only responsible for 25% of drug costs in the "Donut Hole" until next year's $2,000 out-of-pocket cap kicks in.
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