A new law is poised to cap seniors’ prescription drug costs covered under Medicare, starting in 2025. But retirees may be in for a shock next year — significantly higher Medicare Part D premiums for prescription drug coverage.
According to a new analysis by HealthView Services, a provider of health care cost data, the cost of the average premiums will rise between 42% and 57% in 2024 compared to 2023 in five states with the largest populations of individuals over 65 who are on Medicare. This represents an increase ranging from $128.32 to $380.96 from 2023 to 2024, based on three of the largest Medicare providers in each state. The five states include California, Florida, New York, Pennsylvania and Texas.
The increased costs come as new changes put into law through the Inflation Reduction Act will lower the out-of-pocket maximum drug costs for seniors to $2,000 in 2025, down from more than $7,000 in 2023. Other changes put into place with the legislation — such as a $35 monthly cap on insulin and access to free vaccines — have already gone into effect.
Ron Mastrogiovanni, founder & CEO of HealthView Services, explained that insurers may pay higher costs due to the higher out-of-pocket limits, and higher premiums is a way of getting beneficiaries to share that burden. Currently, the federal government covers 80% of the maximum spent on Part D prescription drugs, while insurers cover 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 difference. About a quarter of Medicare Part D beneficiaries are expected to go over that $2,000 limit.
Research from KFF, an independent provider of health policy research, has also found monthly premiums for Part D will be “substantially higher” in 2024, with the national average monthly Part D premium projected to increase 21% to $48, up from $40 in 2023.
Rising Medicare Part D premiums come as retirees will receive a much smaller Social Security cost-of-living adjustment in 2024 — 3.2% — compared to the 8.7% boost to benefits they received in 2023. The average Social Security beneficiary will get about $700 more per year in 2024 through the cost-of-living adjustment, estimates Michael Daley, director of marketing at HealthView Services. But higher costs for next year, particularly with regard to Medicare, may consume most of that increase.
With Medicare open enrollment available through Dec. 7, beneficiaries may take steps now to mitigate the higher expected costs for next year. Plans may shift the prescription drugs they cover and the cost-sharing amounts they charge, so it’s good advice during this open enrollment period for people to take a look at other options and see whether they might be able to get better coverage.