Opening Thoughts on 2024 Medicare Annual Enrollment Period
We have stressed over the years that we recommend “original Medicare” (Parts A, B & D with a Medicare Supplement Plan) for those who can afford it. One reason that we prefer the original Medicare route is because it typically results in having to manage fewer “moving parts” over the course of someone’s retirement. This can make a difference as we get older and potentially become more susceptible to making financial mistakes.
The result of having original Medicare is that there is one moving part, which is your Part D prescription medication plan It’s important to shop your Part D prescription plan every year during open enrollment and this is year is probably the most important ever as a result of the Inflation Reduction Act (“IRA”) that was passed in 2022.
The good news from the IRA is that Medicare is beginning to negotiate prices for some drugs and that the confusing Part D coverage categories are essentially being replaced by a much simpler structure, which is the $590 annual deductible (for 2025) and a $2,000 total for out-of-pocket spending. In other words, in 2025 enrollees pay 100% of costs up to $590 and then 25% coinsurance until they reach $2,000 for their covered Part D prescription medications.
Sounds simple, but the $2,000 cap only applies to drugs covered by a Part D plan. If you pay for a drug that is not covered by your plan or if it is administered onsite at a physician’s office/hospital outpatient department or under Part B, then the $2,000 cap doesn’t apply.
The bottom line for Part D prescription plans as a result of the IRA’s $2,000 out-of-pocket max is that the plans are projected to have to pick up billions more of the total cost of prescriptions and they are going to have to find ways to offset this.
A copay (which is a set amount) in 2024 may be coinsurance (which is a percentage of the cost) in 2025. You may see monthly plan premiums increase. You may see plans drop coverage for certain medications. And we expect that about 25% of Part D plans will simply disappear in 2025.
Plans can change the premiums, out-of-pocket co-pays, the medications covered and how they are tiered, their pharmacy and provider networks and prior authorization procedures each year. Make sure to review your “annual notice of change” from your current plan, which will outline any cost and coverage adjustments that are set to take effect in January.
Then log into www.medicare.gov and locate the plan finder to enter your formulary details (if they are not already pre-loaded) and your preferred pharmacy to shop for the best plan. Don’t be fooled by the lowest monthly premiums. The plan finder tool should provide your expected ‘total’ cost and that’s what is most important. The lowest cost plan may not have the lowest monthly premiums.
As always, if you have any questions or would like to discuss, then please reach out to your ACM Wealth Advisor.
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