Navigating Medicare Plan Changes for 2025

The 2025 Medicare open enrollment period (OEP) started  on October 15,2024 and will continue through December 9, 2024. During the OEP, those individuals aged 65 and older and enrolled in Original Medicare (Medicare Part A and Medicare Part B) can join, drop or switch to another Medicare Advantage Plan. They can also join, drop or switch to another Medicare drug plan (Medicare Part D). Federal annuitants enrolled in Original Medicare can choose a Medicare Advantage Plan offered through the Federal Employees Health Benefits (FEHB) program. Annuitants also have the option of suspending their FEHB coverage and enrolling in a private Medicare Advantage Plan during the AEP.

During 2024, there are 43 Medicare Advantage Plans. However, for 2025 many insurance companies offering Medicare Advantage plans are making changes that leave current Medicare Advantage plan enrollees paying more in premiums for 2025 coupled with reduced benefits.

In addition, some insurance companies are dumping their Medicare Advantage plans altogether or trimming popular offerings including dental coverage and increasing charges such as higher deductibles. This comes in response to new federal government Medicare Advantage plan requirements and to improve insurance company profits. According to Healthpilot (https://www.healthpilot.com), a company that helps individuals choose Medicare coverage, 1.5 million individuals will see their Medicare Advantage plans eliminated for 2025, while 3.5 million individuals will lose their Medicare Part D Prescription Drug Program for 2025. With the same changes expected for FEHB program-sponsored Medicare Advantage plans for 2025, federal annuitants are advised to be aware of these changes during this year’s OEP and the Federal benefits “open season” starting November 11, 2024.

What to Watch for When It Comes to Medicare Advantage Plans

While average Medicare Advantage premiums are expected to decline during 2025, many Medicare Advantage plans are promising $0 premiums while other costs may be increasing. Here is a summary of these other costs:

• Maximum out-of-pocket cost. The maximum out-of-pocket cost is the total amount a Medicare Advantage beneficiary could pay for his or her medical care. Out-of-pocket costs include copayments and deductibles. The company Healthpilot estimates that the overall average in out-of-pocket costs will increase by $450 during 2025 to about $5,929 average for in-network care. This excludes special-needs plans. Out-of-pocket charges related to a Medicare Advantage beneficiary’s drug plan or other types of care, such as dental and vision, are not included in the in-network medical maximum out-of-pocket expenses.

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• Prescription drug benefits. The biggest change for 2025 Medicare Advantage plans is for prescription drug benefits provided through Medicare Part D. The number of prescription drug plans offered through Medicare Part D is decreasing from 30 plans to 21 plans, the lowest number of Medicare Part D plans since the state of Medicare Part D in 2007. Many of the Part D plans that are remaining are raising their deductibles and making other changes that can increase out-of-pocket costs. A Part D drug plan deductible is the amount the Part D plan beneficiary pays before coverage of a particular medication kicks in. On the other hand, one positive change taking effect January 1, 2025, is that Part D beneficiaries’ out-of-pocket costs for Part D medications will top out at $2,000. In addition, a Part D beneficiary will have an option to pay off his or her total drug bill in monthly installments over the course of the year.  Any Medicare Part D beneficiary must be enrolled in Original Medicare. Part D beneficiaries are advised to go to www.medicare.gov to find out whether their prescriptions are included in a Medicare Part D prescription drug plan and how much the drug plan costs. For more information, the beneficiary should go to the drug plan’s web site and look for a formulary – the list of covered prescription drugs and their costs.

• Hospital networks. More hospital systems are leaving Medicare Advantage plan networks. A survey of hospital CFOs found more than half were considering or planning to leave a Medicare Advantage network. Those federal annuitants enrolled in Original Medicare (Medicare Part A and Medicare Part B) who care about having complete access to their doctors and local hospitals should look at their Medicare Advantage plan’s network directory and make sure their doctors and local hospitals are in the directory.  If a federal annuitant enrolled in Original Medicare wants unrestricted access to their medical providers, the federal annuitant is then advised to remain in Original Medicare and be enrolled in an FEHB program health plan, a Medicare Supplement plan, rather than a privately run Medicare Advantage plan. This is because nearly all hospitals and doctors participate in Medicare and accept “assignment” from Medicare. Using an FEHB program health plan as a Medicare supplement plan has the advantage that FEHB program plans are capped. FEHB plan enrollees benefit from the maximum out-of-pocket expenses they have to pay each year. The same cannot be said about privately sold Medigap and Medicare supplement plans. Those plans that do cap annual out-of-pocket expenses can be pricey, or even impossible to obtain. For that reason, federal annuitants are strongly advised not to drop their FEHB program enrollment in favor of a private Medigap or Medicare Supplement policy, typically sold by insurance companies and agents. Note that upon dropping his or her FEHB program enrollment, a federal annuitant cannot reenroll in the FEHB program. 

• Additional Medicare Advantages plan features. Most individuals – employees and retirees – have seen or heard about the most appealing features of Medicare Advantage plans. These features include the extra benefits the plans promise – everything from dental and vision coverage to fitness classes. These extra benefits are also getting trimmed in some Medicare Advantage plans. It is important for a potential enrollee in a Medicare Advantage plan to check the plan’s full description known as “evidence of coverage” documents for details.

In particular, when examining the plan’s “evidence of coverage” document, a potential enrollee in the plan should be aware of the terms “limits apply” or “prior authorization necessary.” 

Picking a Medicare Advantage plan undoubtedly is not an easy task. It is therefore important for federal annuitants who are considering enrolling in a private Medicare Advantage to get unbiased advice. It is unfortunate that insurance companies and their agents who sell Medicare Advantage plans, and are often paid commissions, can have financial motivations for steering individuals toward certain products.

To find impartial information about private Medicare Advantage plans individuals are advised to start with Medicare’s own Web site, https://www.medicare.gov. The State Health Insurance Assistance Program (SHIP) has counselors in every state and the District of Columbia. The nonprofit Medicare Rights center maintains a national helpline. The Kaiser Family Foundation (KFF) and the Center for Medicare Advocacy both offer helpful information about purchasing a Medicare Advantage Plan and a Medicare Part D prescription drug plan.

Ed Zurndorfer, EA, ATA, CFP®, CLU®, ChFC®, CEBS®, ChFEBC℠: Federal Employee Benefits Expert

A former career Federal employee, Ed has published a staggering 1,200+ separate articles on Federal Benefits and Retirement!
Just “Google” his name, and you are likely to find a plethora of sites that contain his writings. Drawn to its mission to reach, teach
and serve Feds, Serving Those Who Serve is the only financial planning practice with which Ed has chosen to affiliate in over
20 years teaching. In addition to conducting Federal Benefits seminars for Serving Those Who Serve, you can find Ed’s
writings here on our blog in the FedZone, and on Fed-Soup, MyFederalRetirement, FederalNews Radio and NITP.

He is a member of the Maryland Society of Accountants, the National Association of Enrolled Agents, the International Society of Certified Employee Benefits Specialists, the Financial Planning Association, the National Association of Health Underwriters,
and the Society of Financial Service Professionals. Since 1999, Ed has taught many thousands of Federal employees about
their benefits, in person and at Federal agencies all over the country. Ed is a true national treasure.

Edward A. Zurndorfer is a CERTIFIED FINANCIAL PLANNER™ professional, Chartered Life Underwriter, Chartered Financial Consultant, Chartered Federal Employee Benefits Consultant, Certified Employees Benefits Specialist and IRS Enrolled Agent in Silver Spring, MD. Tax planning, Federal employee benefits, retirement and insurance consulting services offered through EZ Accounting and Financial Services, and EZ Federal Benefits Seminars, located at 833 Bromley Street – Suite A, Silver Spring, MD 20902-3019 and telephone number 301-681-1652. Raymond James is not affiliated with and does not endorse the opinions or services of Edward A. Zurndorfer or EZ Accounting and Financial Services. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.