Seniors are set to see a cap on their prescription drug costs under Medicare starting in 2025, thanks to a new law. However, this silver lining has a cloud, as retirees may be hit with significantly higher Medicare Part D premiums for prescription drug coverage next year.
According to a fresh analysis by HealthView Services, a healthcare cost data provider, the average premiums are set to rise between 42% and 57% in 2024 compared to 2024. This applies to five states with the largest populations of individuals over 65 who are on Medicare, namely California, Florida, New York, Pennsylvania, and Texas. The projected increase ranges from $128.32 to $380.96 from 2024 to 2024.
The Inflation Reduction Act has introduced new changes that will lower the maximum out-of-pocket drug costs for seniors to $2,000 in 2025, a significant drop from over $7,000 in 2024. Other changes, such as a $35 monthly cap on insulin and access to free vaccines, have already been implemented.
Ron Mastrogiovanni, founder & CEO of HealthView Services, explains that insurers may face higher costs due to the increased out-of-pocket limits, and the hike in premiums is a way to get beneficiaries to share this burden. At present, the federal government shoulders 80% of the over $7,000 maximum spent on Part D prescription drugs, with insurers covering the remaining 20%. When the out-of-pocket max drops to $2,000, insurers will cover 60% to 80% of the costs, with the federal government picking up the slack.
About a quarter of Medicare Part D beneficiaries are expected to surpass the $2,000 limit. Independent health policy research provider KFF has also found that monthly premiums for Part D will be “substantially higher” in 2024. The national average monthly Part D premium is projected to increase 21% in 2024 to $48, up from $40 in 2024.
The increased premiums could be a bigger worry for those in standalone drug plans versus those in Medicare Advantage plans, which offer rebates that can help shield enrollees from higher premium costs. Furthermore, the rise in Medicare Part D premiums coincides with a smaller Social Security cost-of-living adjustment in 2024, which could eat up most of the increase for retirees.
As Medicare open enrollment is available through Dec. 7, beneficiaries are encouraged to take steps now to mitigate the higher expected costs for next year. Beneficiaries are advised to review their coverage options, even if they are content with their current plan, to ensure they are getting the best coverage for their budget.