Wealth Planning Commentary – October 28, 2024

Medicare Open Enrollment and Prescription Drug Updates

We are in Medicare Open Enrollment, which started on October 15 and continues through December 7. Seniors enrolled in Medicare Part D or Medicare Advantage should have received an Annual Notice of Change, a letter that Part D and Medicare Advantage prescription drug providers send yearly. This notice summarizes any changes to the plan's coverage and costs that take effect on January 1 of the following year. We recommend closely reviewing any changes to Part D or Medicare Advantage plans. Medicare Part D is a prescription drug plan offered by private insurance providers, and these plans must adhere to federal guidelines. Costs and coverage specifics can vary significantly by plan. Premiums for Part D are based on modified adjusted gross income (MAGI), so changes in your income and the plan's pricing may affect your premium. Medicare recipients should review their Annual Notice of Change for premium increases, medication coverage changes, or removing providers from the plan’s network. Medicare Advantage plans, an alternative to Part D, typically bundle drug coverage with additional services. Although Medical Advantage plans might have lower premiums than Original Medicare combined with Part D and a Medigap plan, there are issues to be aware of. Medicare Advantage plans, even PPOs, generally involve higher costs for non-network providers, a higher rate of claims denials, and more prior authorization requirements than Original Medicare. Many who experience issues with Medicare Advantage try to switch to a combination of Part D and Medigap plans. This is not ideal and may require enrollment in Medicare Parts A and B and medical underwriting for a Medigap plan. It’s essential to fully understand the potential downside of Medicare Advantage, even though premiums may appear lower than a combination of D and a Medigap plan. Significant changes to Part D are on the horizon due to the Inflation Reduction Act, including a $2,000 cap on out-of-pocket costs starting in 2025. Additionally, a new Medicare Prescription Payment Plan (MPPP) allows beneficiaries to spread out-of-pocket costs over the year, benefiting those near the cap or needing high-cost medications. These reforms may cause premium increases as insurance providers adjust costs to compensate for the cap. The federal government is introducing a pilot program to limit these increases by subsidizing Part D providers to stabilize premiums. Medicare Advantage providers may adjust cost structures in a more opaque manner. Medicare Part B premiums and Income-Related Monthly Adjustment Amounts (IRMAA) for 2025 will be announced soon. By 2026, Medicare will also be able to negotiate drug prices with pharmaceutical companies, which could further impact costs. Please reach out to your Wealth Manager to review your Medicare options.