Retirees will face significantly higher Medicare Part D drug costs in 2024

  • A new law limiting the amount Medicare enrollees pay for out-of-pocket costs of prescription drugs is expected to be phased in starting in 2025.
  • For retirees, this will contribute to higher Medicare Part D premiums in 2024, new research shows.

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A new law is set to cap prescription drug costs for seniors covered by Medicare, starting in 2025.

But retirees could face a shock next year: significantly higher Medicare Part D premiums for prescription drug coverage.

The cost of average premiums will increase between 42% and 57% in 2024 compared to 2023 in five states with the largest populations of people over 65 with Medicare, according to a new analysis from HealthView Services, a health care provider. health. data.

This represents an increase ranging from $128.32 to $380.96 from 2023 to 2024, according to the company. Calculations are based on three of the largest Medicare providers in each state.

The five states include California, Florida, New York, Pennsylvania and Texas.

The rising costs come as new changes to the law through the Inflation Reduction Act will reduce the maximum cost of drugs for seniors to $2,000 in 2025, from more than 7,000 $ in 2023.

Other changes put in place with the legislation — such as a $35 monthly cap on insulin and access to free vaccines — have already taken effect.

Insurers may pay higher costs because of higher reimbursement limits, and higher premiums are one way to get beneficiaries to share that burden, according to Ron Mastrogiovanni, founder and CEO of HealthView Services.

Today, the federal government recovers 80% of the maximum of more than $7,000 spent on Part D prescription drugs, while insurers cover the remaining 20%, Mastrogiovanni said.

When the maximum out-of-pocket amount drops to $2,000, insurers will cover 60 to 80 percent of the costs, with the federal government picking up the difference.

About a quarter of Medicare Part D beneficiaries are expected to exceed this $2,000 limit.

“The insurance company has to do something to compensate for this loss, given the number of people who could go there,” Mastrogiovanni said.

“Therefore, we who have Medicare Part D are going to share that cost,” he said.

A study from KFF, an independent provider of health policy research, also found that monthly premiums for Part D will be “significantly higher” in 2024. The national average monthly Part D premium is expected to increase by 21%. in 2024 to reach $48, up from $40. in 2023, according to KFF.

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Those monthly premiums could increase again in 2025 when the new policy takes effect, according to Juliette Cubanski, deputy director of KFF’s Medicare policy program.

“It is possible that between 2024 and 2025 we will again see another round of premium increases,” Cubanski said.

That would be a greater concern for people who participate in stand-alone drug plans, she noted, than for people who participate in Medicare Advantage plans, which offer discounts that can help protect enrollees against higher premiums.

The increase in Medicare Part D premiums comes as retirees will benefit from a much smaller Social Security cost-of-living adjustment in 2024 – 3.2% – compared to the 8.7% increase in benefits they received in 2023.

The average Social Security recipient will receive about $700 more per year in 2024 thanks to the cost-of-living adjustment, estimates Michael Daley, chief marketing officer at HealthView Services.

But higher costs for next year, particularly for Medicare, could absorb most of that increase.

“If you have a premium Part D plan, on average, 54% of Social Security’s cost-of-living increase will go toward paying the additional costs you’ll have to cover for Part D premiums ,” Daley said.

Indeed, standard premiums for Medicare Part B, which covers the services of doctors and other health care providers, will increase by $9.80 per month to $174.70 in 2024, up from $164.90 per month this year. year. Higher-income beneficiaries will pay higher premiums.

With Medicare open enrollment available through December 7, beneficiaries can take steps now to mitigate higher costs expected for next year.

In addition to premium changes, plans can also change the prescription drugs they cover and the cost-sharing amounts they charge, Cubanski noted.

“It’s always good advice during this open enrollment period for people, even if they’re happy with the coverage they have, to just look at other options and see if they could get better coverage.” , Cubanski said.

Finding the best coverage for your budget can help you avoid having to cut back on your prescription medications or doctor visits, according to Mastrogiovanni.

Medicare beneficiaries should also be aware that a 12% annual premium penalty applies to those who do not enroll in prescription drug coverage at age 65, he said.

“Even if you’re not taking any medications and are retiring, I highly recommend getting the cheapest plan possible,” Mastrogiovanni said.

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