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Medicare changes in 2025:
What you and your clients need to know
Key takeaways
- Medicare changes for 2025 are significant, and clients are looking to financial professionals to help them navigate these changes
- Annual increases will apply to the income-related surcharges to the premiums for Medicare Parts B and D
- The Part D “donut hole” has been eliminated, and the simplified cost structure includes a $2,000 out-of-pocket cap
- Changes to Medicare Advantage plans include funding increases, potential premium decreases, possible alterations in covered services, network changes or modifications to cost-sharing arrangements
- Starting this year, Medicare Advantage policy holders will receive a new midyear notification reminding them about any unused supplemental benefits in their plans
Medicare plays a critical role in financial planning for retirees. It’s a cornerstone of their health coverage and a big factor in managing retirement expenses.
As a financial professional, you know how crucial it is to stay updated on any changes that could impact your clients’ financial plans. What you may not realize is how important your help with Medicare planning is to current and potential clients. In fact, according to a 2024 Nationwide Retirement Institute® survey, 69% of those surveyed said if a financial professional couldn’t help them navigate their Medicare choices, they would probably switch to one who could.
With that in mind, let’s go over some of the significant changes to Medicare in 2025.
Elimination of the Medicare Part D “donut hole”
One of the most important changes is the end of the Medicare Part D “donut hole.” This change will impact many of your clients, so it’s crucial to understand what it means and how you can help them navigate it.
The donut hole is a coverage gap in Medicare Part D prescription drug plans. In the past, after reaching a certain spending limit, beneficiaries must pay a larger share of their prescription costs until they hit the catastrophic coverage threshold. This gap led to high out-of-pocket costs.
Medicare Part D changes for 2025:
Simplified cost structure
In the past, after reaching the initial coverage limit, beneficiaries entered the donut hole and paid a higher percentage of drug costs. In 2025, this step is eliminated. Instead, they’ll pay a fixed 25% of their drug costs from the time they meet the deductible until they reach catastrophic coverage.
New out-of-pocket maximum
A new $2,000 out-of-pocket cap has been introduced, limiting the total amount beneficiaries pay for their prescriptions annually. This cap provides financial protection and helps clients manage their budgets more effectively. Additionally, they'll have the option to spread the cost out over 12 months, which can help clients budget costs over the course of the year.
These changes mean more predictable and manageable medication costs for your retired clients, and they may bring significant relief to those who rely on expensive prescriptions.
Ensure that your clients understand how their costs will change and the impact that may have on their budget. This is a good time to look at their overall health care costs and find out if there are other ways to save.
Medicare Advantage remains stable with ample choices
Medicare Advantage enrollment is projected to grow to 35.7 million in 2025. Medicare Advantage plans are alternatives to traditional Medicare and are offered by private insurance companies. These plans sometimes include extra benefits, such as vision and dental coverage.
Medicare Advantage changes for 2025:
Funding (and possibly benefit) increases:
Insurance companies that offer Medicare Advantage plans are receiving more government funding. The Centers for Medicare & Medicaid Services have implemented changes that should increase plan revenues by an average of 3.7% this year. The additional funding is intended to support initiatives such as expanded telehealth services, increased access to care in rural areas and the inclusion of more comprehensive benefits, such as wellness programs and supplemental services.
Monthly premium decreases
Average monthly plan premiums have declined to $17 in 2025, down $1.23 from 2024.1 Additionally, 60% of enrollees who have remained in their current plan should see a $0 premium, and the vast majority of members should have the same or lower premiums if they stay in their current plan.
Plan adjustments
Insurance companies are changing their offerings of Medicare Advantage plans. On average, there will be 34 plans to choose from in 2025, down from 36 in 2024.2 Clients should review their plan details carefully to understand any changes.
Discuss the potential financial impact of cost changes. If needed, help clients explore other coverage options, such as Medigap plans, to discover if they might offer more predictable costs.
Adjustments to income-related premiums for Medicare Parts B and D
Like every year, there are increases to the surcharges on income-related premiums for Medicare Parts B and D, even though the premiums themselves may decrease slightly in 2025, depending on the plan.
- Updated income brackets: The income thresholds for determining who pays higher premiums have been updated. These brackets are based on beneficiaries’ modified adjusted gross income (MAGI) and are reviewed annually. Increases to these brackets impact who will be subject to the additional surcharges on the Medicare premiums.
- Premium changes: Higher-income beneficiaries will notice increases in their premiums for Medicare Part B (which covers doctor visits and outpatient care) and a possible decrease for Medicare Part D (which covers prescription drugs). The exact change will depend on their income level.1
For your clients turning 65 or enrolling in Medicare for the first time this year, now is a good time to review their income levels and project how the adjustments might impact their premiums. You can also help them explore strategies to manage or reduce their MAGI and help them incorporate these changes into their financial plans.
New notification about unused Medicare Advantage benefits
Starting in 2025, Medicare Advantage policyholders will receive a new midyear notification reminding them about any unused supplemental benefits in their plans. This change aims to help beneficiaries make the most of their coverage throughout the year.
Medicare Advantage plans sometimes include extra benefits beyond traditional Medicare, such as dental, vision, fitness programs and more. However, many policyholders forget to use these benefits or are unaware of what’s available to them.
Consider giving your clients a heads-up about this notification before the middle of the year, reminding them
to look out for the notification and review it carefully. You can also encourage them to make the most of their unused benefits to help maintain their health and lower future health care costs.
Be your clients’ trusted Medicare resource
Medicare changes in 2025 bring both challenges and opportunities. By staying informed and proactive, you can help your clients maintain their financial security in retirement.
Nationwide Retirement Institute® can help.
Use our Medicare resources to educate yourself and your clients on the details of this critical benefit. For additional consultation, contact the Institute Planning Team at 1-877-245-0763 or
nriplanning@nationwide.com.
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