February 10, 2025 – Big changes are coming to Medicare and Social Security in 2025, and if you’re on Medicare—or soon will be—you need to know how these updates could impact your costs and coverage. In today's Lifetime Planning segment, Jim Puplava and Medicare expert Brian McArthur break down the rising premiums, deductible increases, and the major shift in Medicare Part D, including a new $2,000 out-of-pocket cap. They also explore why Medicare Advantage plans are cutting benefits and how to navigate your options wisely. Don’t miss this essential conversation—tune in to get the full details and expert advice on making the best Medicare decisions.
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Transcript
Jim Puplava:
Well, it is a new year and in a new year there are new changes coming to Social Security and Medicare. They've increased Social Security payments, but there's a lot going on in Medicare, whether it's premiums, deductibles, and various programs. Let's find out what the details are. Joining us on the program is Brian MacArthur. And Brian, let's start from the top and go right into Medicare Part B. They've increased the premiums and they've increased the deductible. So what can you tell us about that?
Brian McArthur:
Sure, Jim. So the benefits tend to get a little bit more expensive every year. This year was no different. The two most notable things about Medicare Part B are the monthly premium that most Americans pay was $175 a month in 2024 and that's been bumped up to $185 a month. So $10 monthly increase, not to be unexpected, and then the Part B deductible has gone from $244 as an annual deductible to $257. The only other things that are probably worth mentioning are, of course, Medicare will charge you more for that Part B premium depending on your income. And the income tiers that push you into those higher monthly premiums have also adjusted. And on the whole, I'm going to say, you know, have anybody affected by that? A lot of your clients are; they'll probably pay a little bit more for their Part B premium at their current income level in 2025 than they may have paid in 2024.
Jim Puplava:
Yeah, that's important to let everyone know there's six tiers of payments for Medicare based on your income. So maybe your income hasn't changed, but you took large capital gains or taxes in 2024 that could affect your Medicare premium. Brian, I want to move on. There were big changes to Medicare Part D, especially the out-of-pocket cap. Let's talk about that because there's a new change. They're going to cap it at $2,000 and after that, basically, you don't cover any, you don't have to pay for things. So let's elaborate on that, right?
Brian McArthur:
And as two critical thinkers, Jim, you and I know there is no utopia. There are trade-offs to everything. And the Inflation Reduction Act has been almost entirely fully phased in as it relates to Medicare Part D. Some of the things worth pointing out there, which is the biggest thing that the previous presidential administration was touting, you know, as loudly as they could. And I probably would too if I passed that legislation, is that there is now a $2,000 annual out-of-pocket maximum on Medicare Part D. And remember, Part D is for drugs. That's your prescription drug coverage. There really has never been an out-of-pocket maximum for Medicare Part D prior to the Inflation Reduction Act, which does sound scary. To give you some perspective for our clients who have been on Medicare prior to the Inflation Reduction Act coming in, while there was no max out-of-pocket, we found that, you know, cancer meds are kind of the most expensive meds out there, Jim. And most of our clients who were dealing with cancer who are on expensive meds — and not everybody who's getting cancer treatment is always on expensive meds — but if they were without a max out-of-pocket, those clients would pay about $7,000 to $8,000 a year out of their pockets for their prescription drug coverage. Now that's a good amount of money, but that's about as ugly as we ever saw the bills get without a max out-of-pocket. So the Inflation Reduction Act, among several other things, one of the things it set out to do was to establish a max out-of-pocket limit of $2,000 a year. So clearly, if you're on Medicare and you're taking medications that were costing you more than $2,000 a year, holding everything else constant, you would imagine you would benefit from legislation that caps your out-of-pocket expenses at $2,000. Right? And so, from that standpoint, anybody who was on really expensive medications is almost certainly going to benefit from the new $2,000 max out-of-pocket limit from the Inflation Reduction Act. There are other trade-offs. As you can imagine, the cost of Medicare Part D drug plans has gone up quite a bit. The legislation, and I'm just hastily summarizing it, basically says, "Hey, $2,000 max out-of-pocket." The legislation was trying to anticipate different reactions in a private market or semi-private market on how the manufacturers might reply, respond to that, or how the insurance companies might respond to that. And the legislation did set parameters on how insurance companies and manufacturers could respond. However, one of the things they really didn't wrangle in was what could happen to the monthly premium. So on the whole, a lot of monthly premiums on Part D drug plans have gone up precipitously, you know, 50%, 100% if you're on a Part D drug plan. And if it did not go up that much, it doesn't mean I'm a liar. It means there's a couple of insurance companies out there who have dug their feet in the sand and said, "We think we can keep these low monthly premiums for a year or more." But on the whole, most of the cost of the Inflation Reduction Act is really going to be passed on to the majority of Medicare beneficiaries by way of monthly premiums. So some people will pay more if they're not on super expensive meds. If you're on super expensive meds, you're probably the smaller group of people who will benefit from the Inflation Reduction Act on the whole.
Jim Puplava:
Now explain and talk about how they eliminated the donut hole. This was always confusing for a lot of people. Explain it right.
Brian McArthur:
So the donut hole was a cute name for what they called the coverage gap. Probably the easiest way to think of the donut hole was it was a deductible that kind of showed up in the middle of the year, which is not usually when we pay deductibles. So a lot of Part D drug plans and other types of insurance, auto insurance, health insurance, all have deductibles that usually kind of hit you between the eyes early in the year. And a lot of Part D drug plans still have annual deductibles. This year, most of them are about $590. But back when there was the donut hole, you might hit your $590 deductible. So you were paying quite a bit for your meds, maybe in January, February, and March, and suddenly you hit your deductible. So when you went into the pharmacy in April and May, you maybe had a nice lower copay and you thought, "Okay, I've met my deductible. Now I've got this nice modest copay for the rest of the year." And you keep paying that modest copay in April, May, and June. And just when you think you have this whole thing figured out, you fell into the donut hole and suddenly your out-of-pocket expenses went through the roof again. So it was very volatile, very lumpy. Every time you filled your medications at the pharmacy, if you were on reasonably expensive meds, every time you thought you had an idea what your copay would be next month, it kind of changed all the time. So the donut hole could be pretty punitive from a cash flow standpoint to people who were exposed to it. And that has now been eliminated. And the copays that people will pay on Medicare Part D now are definitely way more linear and cash outflow friendly, which is nice. And they're capped at $2,000 a year, which could be nice if you were paying more than $2,000 a year. But again, a large portion of that legislation will be pushed onto the end user in a drastically increased cost.
Jim Puplava:
For.
Brian McArthur:
Part D drug coverage.
Jim Puplava:
Let's move on to Medicare Advantage. They've been very popular because they cover a lot more benefits. We're seeing a cutback on Medicare Advantage plans in 2025. Why is that?
Brian McArthur:
Great question. And that's the perfect segue. So you want to think of making your Medicare decisions as like a fork in the road. You know, I always tell people, think of it as Part A, Part B, Part C, Part D, more or less. Part A and B come from the government. Part C and D come from insurance companies. Part A and B from the government cover 80% of your medical bills, none of your meds. Everybody has to have that, and you pay whatever you pay for that based on your income. And then as you look at what I'll call Part C and D, just to keep things simple, is you have this fork in the road. You can stay with original Medicare and get a Medicare supplement and a separate Part D drug plan, or you can buy a Medicare Advantage plan. Either one of those options will functionally cover the remaining 20% of your medical bills that your Parts A and B from the government do not pay and give you prescription drug coverage. On the Medicare supplement side, those Part D drug plans that you would buy alongside a Medicare supplement if you stayed with original Medicare, those costs are going up and we can see them right because they have monthly premiums and whatever they were in 2024, a lot of them are 50%, 80%, 100% more expensive in 2025. Not all, but a lot. On Medicare Advantage, Jim, the Part D drug coverage is built into the entire Medicare Advantage plan. So you're buying one policy with the drug coverage wrapped up into it. And Medicare Advantage plans are terrific for a lot of people as well. I always say it's not heroes and villains. Both Medicare supplement or Medicare Advantage will be the best health insurance you've ever had. There are trade-offs between those two good options, but it's not like a hero and villain sort of thing. All that said, Jim, the way Medicare Advantage plans work, and this might be helpful for people to know, sometimes we explain Medicare Advantage plans and they say, "Well, it doesn't make sense that this is such good coverage, has no monthly premium." Which is a rational question or a rational thing to be curious about. What happens with Medicare Advantage, Jim? Is yes, they're covering the remaining 20% that Part A and B from the government do not cover. Yes, they're giving you Part D drug coverage with Medicare Advantage. Jim, Medicare Advantage plans are also taking over the 80% responsibility from Medicare. So for everybody who chooses a Medicare Advantage plan, Medicare is not paying 80% of their bills anymore. The insurance company you choose for your Medicare Advantage plan is paying the 80% the government used to pay, the 20% you expect them to pay, giving you prescription drug coverage. So when you're in a Medicare Advantage plan, Medicare, the government kicks up their heels and goes, "Hey, this is great. Puplava's on a Medicare Advantage plan, you know, UnitedHealthcare, Humana, whoever is going to take care of him, and we don't need to worry about paying 80% of Jim Puplava's future unknown skydiving medical related medical bills, right?" So they start sending the Medicare pays the insurance company that's providing the Medicare Advantage plan, I don't know, eight or nine hundred dollars a month, and there's enough meat on that bone to cover the 80%, cover the 20, cover the drugs, maybe throw in a vision benefit, a gym membership, maybe dental, pay insurance agents, that sort of thing. But, and then Medicare watches what the insurance companies do with the money and they have to spend, you know, about 85% of it on the end user and that sort of thing. What's happened here is because the drug coverage that's built into that Medicare Advantage plan, the cost of the Medicare Advantage insurer providing that drug coverage has now gone through the roof. So out of that $800 or $900 a month that the Medicare Advantage insurer was collecting in 2024 to take care of all these things for the client, way more of that $800 or $900 a month is now going towards providing the drug coverage. And the insurance companies need to scale back to meet the needs of providing drug coverage and meet the minimum standards of Medicare. So to your point, what we've seen a lot of is a lot of those extra benefits are now starting to, we've seen dental benefits go away, we've seen, you know, vision benefits get a little bit crummier, copays have gone up a little bit. And you know that the cost of that higher drug coverage has to come from somewhere, Jim, and let's talk.
Jim Puplava:
About what I call medicine 2.0. It used to be, you know, medicine 1.0 was surgery, radiation, and drugs. And you got people like Peter Attia out there, they're talking about living longer, talking about the number one thing is exercise, number two is diet, number three is sleep, and then alternative therapies. Has Medicare moved in that direction? I know they have something like I think they call Silver Sneakers that they emphasize, you know, let's say preventive medicine instead of just waiting till something happens and then treat it.
Brian McArthur:
I would say that they have. You know, I've been really focused in the Medicare space, as you know, for about nine years. Have I seen any sizable changes in those nine years? No, but that's not to be dismissive because the other way to look at it is that prior to those nine years where I got really focused on this area of the industry, you know, Medicare plans virtually every Medicare plan will give you a free gym membership. The biggest company out there that most of them use is Silver Sneakers. But it's not the only one. It sounds altruistic, but, you know, you line up 100 Plavas and you give them all free gym memberships. The Plavas who go to the exercise gym regularly will probably run up lower medical bills and the Plavas who don't. So it's to the insurance companies' benefit to make it easy for you to, you know, exercise and stay active. Additionally, especially on the Medicare Advantage side, a lot. I mean, in a lot of cases, virtually every area of preventive medicine has low or no copay. So, you know, insurance companies as well as they want to, they want to spend the money to keep you healthy rather than to, you know, try to spend a lot more money to turn you from unhealthy back to healthy. So, so I guess that's a long way of saying Medicare plans for a long time have been incentivizing their membership to definitely exercise. I don't know that I could really comment on the diet stuff. There's probably some diet resources that, you know, that people can look into. And I think every Medicare plan probably has some online resources that you can kind of pull off from that. Is it better or worse than anything else you can find on the internet? I don't know. But definitely most Medicare plans are very focused on making it easy for you to exercise.
Jim Puplava:
Oh, I was just bringing up a lot of our listeners may be familiar with Dr. Dean Ornish. He was the one that turned Bill Clinton's health around. He's got a program out, Brian, that takes care of and has had remarkable success in dealing with dementia and heart disease, and part of it is a diet program. And I think there's about 16 or 17 states that cover Ornish's program. So if you're out there and you have the beginning stages of dementia or you've had heart disease, he's had remarkable luck. And depending on the state, you can get it covered under Medicare. I think it's like a nine-week program. So anyway, I just wanted to bring that up. Something else that came up today with a client; the client is turning 65 this year. They would have to wait until age 67 to get full Social Security benefits, but they want to start Medicare. And I told them, I said, you know, go ahead and make the Medicare premiums, but wait until age 67 because if you take it now at age 65, they're going to dock you on part of your benefits and that will stay that way the rest of your life. So I didn't want them to do that. Any advice?
Brian McArthur:
Yeah. So your team is very well equipped to help people navigate, you know, when to draw Social Security. With a tongue in cheek, I usually say, "Tell me when you're going to die and I'll tell you when to draw Social Security." Right. So there's, but of course, there are other dynamics, you know, of what your benefit would be, what your spouse's benefit will be. Maybe a past spouse. Are you currently earning income that can incent or disincent people from drawing Social Security at a certain point. But you know, a lot of your clients are good savers because you kind of need to be a good saver to be clients of yours, Jim. And, and oftentimes, not always, but I observe that, you know, the advice your team gives is, you know, if you can afford to wait to do it. But it's a very, you know, situational type thing. I claim expertise on Medicare and competence on Social Security, but that's why your clients just are lucky to have your team and you to get into the nitty-gritty on Social Security.
Jim Puplava:
So as we conclude, Brian, are there any key things that you would advise somebody like my client getting ready for Medicare in terms of which direction, whether it's an Advantage program, Medicare Part B plus a Medigap insurance policy, which I think most people use the G Medigap policy. Any particular recommendations that you would give to somebody?
Brian McArthur:
Yeah. So, you know, I think it's important to obviously get educated. I know everybody says that, but, you know, they keep this Medicare thing just complicated enough that I always tell my team and me that, you know, we'll always know we'll have a job tomorrow, which is a terrible thing to say out loud. You're grateful for. But, on the whole, I like Medicare. On the whole, it's very good news, really. No matter which option you go with, Medicare supplement, which means you're staying with original Medicare, or Medicare Advantage, either way should be the best health insurance you've ever had. So there's plenty of room for optimism. Jim, that being said, again, there's still trade-offs between these two great options. A lot of, we kind of help people weigh those agnostically without spending people's money. A lot of your clients, you know, once they understand both sides will stick with original Medicare, not all, but, and most of them feel like, I mean, a Medicare supplement plan, you just don't, you really just don't have to think about much. You can go see any doctor in the country. No referrals, no networks. So the no-network part is even more flexible than a PPO, which to date's been the most flexible thing any of us have had access to. And you almost never see any bills. Of course, there's a monthly premium. Most of your clients feel like that monthly premium is pretty modest for what you get. And that's, and, and a good portion of your clients just say, you know, I'm going to do that. Check the box. I don't want to have to think about this. If life throws me a curveball, I want to know I can go to Mayo Clinic, Cleveland Clinic. Candidly, for people who go that route, we don't even need to know who their doctors are, because you can go anywhere. And since there's no networks, you can't get a bigger bill at one medical group versus a smaller bill. So, so that's, you know, a very absolute way to address Medicare. Kind of set it and forget it. And it's terrific. Medicare Advantage plans are also terrific. The biggest things to keep in mind is, you know, making sure that you're looking at plans that your doctor or doctors or medical group are in network with. You know, everybody wants to keep their doctors and of course they'd like to keep them in network. So that part is very similar to the typical decisions you make when you choose health insurance. A Medicare Advantage plan is probably going to be better than any HMO or PPO you've ever had before. Probably the biggest areas of volatility lately are one, the increase in Part D drug coverage, which is shrinking those benefits in the Medicare Advantage side. And, you know, for those of you on a Medicare Advantage plan, you may have observed some of that between your 2024 and 2025 plan. But probably what's more consequential, Jim, is the, the medical groups are starting to push back against some of these Medicare Advantage plans. Not all. I don't want to position this as a sky is falling thing, but it used to be that medical group X, Y, Z who used UnitedHealthcare or Humana for their Medicare Advantage contracts, just renewed it every year. There really wasn't much volatility. And now because I think there's less dollars to go around and more negotiating back and forth, we've had to be way less cavalier, assuming that since your doctor is in network with Humana this year that you know that they'll definitely be in network next year because a lot of these medical groups are saying are are not making it as easy to renew the contracts. And a lot of people get things in the mail from the medical group who say, "Hey, we're renegotiating with your insurance company. We're not sure if we're going to be in network. It's ongoing." It's created a lot of anxiety and disruption among the people who get those letters. And you know, we kind of have to talk them through that. There's a lot of opportunity for misunderstandings here in San Diego County, Anthem Blue Cross did not get their in-network status renewed with Scripps Clinic. That affected some people on Anthem, some people not. But if you had Anthem on your ID card, you were calling us, asking us if you were okay. So that's starting to happen a bit more where it's more important to remain mindful every year, "Hey, is my doctor going to be in network next year? Are they going to renew the contract?" Sometimes it's, it's just a bit more disruption on that space, in that space than there ever has been. So does that mean you should leave Medicare Advantage? I'm not here to say that because as long as your doctor's in network and you're okay with the benefits, it's going to be great. If you have been through a couple of those roller coasters of the in-network out-of-network volatility, of course, you know, you might be wondering, "Well, should we move to original Medicare with a Medicare supplement?" And you know, the answer is maybe, obviously that it's possible to do. I would point out that for people on a Medicare Advantage plan right now in February 2025, there, even though open enrollment is over, there is an election window to move from Medicare Advantage to original Medicare by March 31st for an April 1st start. You would only do that if you can get a Medicare supplement plan. And a lot of those people will probably have to answer health questions in order to see if they can get approved for a Medicare supplement. So if you had a little bit of volatility on the Medicare Advantage side, we are in a window where we could consider moving to original Medicare if you can get approved for a Medicare supplement. And we'd probably have to walk you through the health underwriting questions to see if that's possible.
Jim Puplava:
All right, well, listen, Brian, I know that there's the open enrollment period that goes, I think, from what, October 15th to December 7th. What if you're going to go on Medicare mid-year, how do you handle that as a final question?
Brian McArthur:
Yeah, and all of that is basically triggered on, you know, if you're turning 65 in June, June 20, you're eligible to start Medicare June 1. So those, the initial election period is based entirely on your birthday. So you don't have to worry about open enrollment to go on to Medicare if you're just turning 65 in, let's just say June. Likewise, Jim, if you've worked past 65, which a lot of your clients do, 65 is not terribly old anymore. And a lot of your clients will work until it stops being fun and, you know, find ways for their career to work for them; you're probably a good example of that, Jim. So, so if somebody was past age 65 ready to retire, the decision to go on Part B triggers an election period or losing employer coverage. So people turning 65 and moving off of their employer-sponsored coverage onto Medicare, both of those people, those groups of people can make those decisions year-round.
Jim Puplava:
All right, well, listen, Brian, if our listeners would like to contact you or find out more about the advice and the consulting you do regarding Medicare, how could they do so?
Brian McArthur:
Yeah, thanks for asking. They can go to designmymedicare.com, just like it sounds, designmymedicare.com, and we've got a great team of very skilled staff members and insurance agents to guide you through your Medicare needs under the watchful eye of your trusted financial advisor, which for a lot of you will be, you know, Financial Sense and Jim's family of companies.
Jim Puplava:
All right, well, listen, Brian, thanks for coming on the show and updating us. It's like I said, I, I don't think you ever have to worry about a job because every single year they make changes to the program. So certainly keeping everybody busy. Thanks so much for coming on the program.
Brian McArthur:
Oh, thanks for having me, Jim.
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