Seniors May See Huge Increases to Medicare Advantage Costs

Seniors could see large increases to their Medicare Advantage costs in 2025 as major changes are underway for prescription plans.
Medicare Advantage and Part D plans are set to experience significant updates, and it’s a mixed bag of news for seniors. On average, seniors could see their out-of-pocket drug costs drop by about 30 percent, said Michael Ryan, a finance expert and the founder of michaelryanmoney.com.
Because of the Inflation Reduction Act, seniors will see a $2,000 out-of-pocket cost cap for prescription drugs in 2025, so they won’t have to pay any extra on co-pays or coinsurance once that number is met.
More From Newsweek Vault: The Latest Social Security COLA Estimate: Will It Be Enough to Keep Pace With Inflation?
But as a result of that new rule, insurers are likely to raise their premiums on seniors.
“It’s not all sunshine and rainbows,” Ryan told Newsweek. “While the changes aim to cap costs, we might see some premium increases as plans adjust. It’s like squeezing a balloon. Push down on one end, and the other end pops up.”
For some seniors, especially those on pricey medications, the savings could be in the thousands, Ryan said. But for others who do not use many prescriptions, premiums are likely to rise by $100 to $300 a year.
More From Newsweek Vault: Best Place to Put Your Benefits: CD vs. High-Yield Savings Account
“If you’re on expensive meds, you’re probably coming out ahead. That $2,000 cap is a lifesaver for some folks,” Ryan said. “If you’re an average user, you might see a small bump in premiums, but you’re getting peace of mind.”
In 2025, the donut hole, or coverage gap, will also be going away. After a certain amount of money has been paid for covered drugs, seniors have had to pay all costs out-of-pocket for prescriptions up to a yearly limit, according to heathcare.gov. Then, once the limit has been met, the coverage gap ended and the plan helped pay for covered drugs again.
More From Newsweek Vault: Online Banks vs. Traditional Banks: Learn the Differences
“That’s been a big thorn in the side for so many,” Ryan said. “Good riddance.”
Drug manufacturers will also be offering discounts throughout the year, and seniors will have a chance to spread their costs over the year with a new monthly payment option.
Because of the variety of changes ahead, it’s advantageous for seniors to shop around during the open enrollment period, which begins October 15.
“Big changes are coming for many Medicare beneficiaries, and in some cases, people will need or want to enroll in a new plan,” Louise Norris, a health policy analyst for medicareresources.org, told Newsweek.
“So, it’s more important than ever to pause before tossing out what you think is junk mail. A deluge of Medicare-related mail is on its way, and it won’t all be marketing promotions from insurers.”
Some insurance companies are also leaving certain markets and ending plan options altogether.
For example, Humana said it would be exiting 13 markets nationwide, leaving around 560,000 in need of a new plan.
Meanwhile, Mutual of Omaha is ending its standalone Medicare prescription drug plans because of the higher costs associated with the Inflation Reduction Act.
“It may be needed for seniors to take a deeper dive into their annual notice of change,” Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, previously told Newsweek.
“From year to year, that document may not carry as much weight as it does this year, as there are changes at the federal level, changes with the number of providers, and, sadly, changes to premium costs in the year ahead.”