Two research professors from Georgetown University’s Medicare Policy Initiative, Rachel Schmidt and Jack Hoadley, have spent the majority of their careers conducting research and advising federal policymakers on improvements to the Medicare program. They also volunteer directly with Medicare beneficiaries through their counties’ State Health Insurance Assistance Program (SHIP) – a free service where consumers can call for unbiased assistance choosing among Medicare options like traditional Medicare, Medigap plans, Medicare Advantage plans, and Medicare Part D prescription plans. In this blog series they share some of the most common challenges beneficiaries face in understanding their constantly shifting Medicare choices, cost, and coverage. All beneficiary names and identifying details have been changed to protect their privacy.
By Rachel Schmidt and Jack Hoadley
The conversation with 90-year-old Marjorie began over trying to find a new stand-alone Part D prescription drug plan (PDP) that would cover her expensive blood thinner and 10 other medications at affordable copayments. A widow, Marjorie had no family to help her compare plans, so she called her county’s SHIP office. Majorie had traditional Medicare, and like many beneficiaries who aren’t in a Medicare Advantage (MA) plan, she purchased a Medigap policy to reduce the uncertainty about her out-of-pocket costs. She also had a stand-alone PDP. Marjorie had received an Annual Notice of Change from her current PDP and was worried about drug costs on top of the $185 per month she would pay for the Part B premium and $400 per month for her Medigap policy. Her income of about $3,000 a month was too high to qualify for Extra Help with Part D premiums and cost sharing but was low enough to qualify for some assistance from her state towards her drug premium. Yet even with that assistance, Marjorie saw health costs consuming about a quarter of her income. Her concern led her to ask not only about stand-alone drug plans, but also about options for enrolling in a MA plan, even if it meant leaving the doctors she sees regularly.
Majorie needed help with a few different choices:
- She could stick with traditional Medicare, where she had a lot of flexibility to choose her providers and find another drug plan, but potentially she could find a PDP that would cover her prescriptions with lower cost sharing.
- She could switch into a MA plan that would include Part D prescription coverage and likely lower her out of pocket costs, but she needed help understanding how MA plans operate networks and use prior authorization.
- She also needed help figuring out if she would qualify for any of the income-based subsidies that could help her cover out-of-pocket costs.
Marjorie’s story is one of dozens we heard as SHIP counselors during the recent Medicare annual enrollment period when beneficiaries had the opportunity to join or switch stand-alone PDPs and MA plans. The two of us have many decades of experience researching issues in Medicare and health care policy. But more recently, we’ve had the opportunity to volunteer as SHIP counselors, a federally-funded service that provides free counseling to Medicare beneficiaries. We have always understood that Medicare is vitally important for providing health care coverage to tens of millions of beneficiaries and is very complicated. Still, our experiences speaking with beneficiaries leave us humbled and sometimes flabbergasted by the program’s importance and complexity. Our reflections in this post relate primarily to beneficiaries in original Medicare who get Part D benefits through stand-alone PDPs. However, questions about the affordability of PDP premiums and cost sharing are important factors behind why some beneficiaries are choosing to enroll in Medicare Advantage plans.
An important time to compare plans
Many changes taking place in 2025 made the 2024 open enrollment season an especially important time to shop. Implementation of the Inflation Reduction Act (IRA) led to unprecedented structural changes to the Part D benefit:
- For 2025, enrollees will pay no more than $2,000 in cost sharing for drugs on their plans’ formularies and can elect a new option through their plan to smooth out deductibles, copayments, and coinsurance over the year (called the Medicare Prescription Payment Plan).
- Part D’s standard benefit structure is redesigned, with plan sponsors bearing much more financial risk for their enrollees’ drug spending, as was intended when Part D began back in 2006. Medicare will still subsidize about 75 percent of costs for basic drug benefits, but it will do so more through monthly capitated payments to plans rather than cost-based reinsurance paid on behalf of beneficiaries with high drug costs. Plans must also bear more risk than they did in prior years for enrollees who receive Extra Help with premiums and cost sharing.
How plan sponsors responded to IRA changes
For 2025, plan sponsors reacted to Part D’s changes by submitting bids that, on average, assumed they would incur 42 percent higher costs per enrollee for basic drug benefits. Due in part to a variety of structural issues, stand-alone drug plans have been much more likely to incur losses in Part D than Medicare Advantage prescription drug plans (MA-PDs). In response to these higher bids, CMS initiated a new premium-stabilization demonstration that will pay sponsors an estimated $5 billion in 2025 to thwart PDP premium increases. Reflecting those extra demonstration subsidies, enrollees in PDPs experienced a range of premium increases and decreases. In the states where we counsel beneficiaries, PDP premiums range from zero (no enrollee premium at all) for a plan with a $590 deductible, to nearly $120 per month for a plan with no deductible, supplemental coverage, and a broader formulary.
For a few plan sponsors, another response to policy changes was to reduce their number of PDPs. One, Mutual of Omaha, exited the PDP market entirely. CMS terminated Clear Spring Health’s PDPs due to repeatedly low quality scores. Two sponsors, CVS Health/Aetna and UnitedHealthcare, reduced their numbers of plans. Wellcare, Cigna, and Humana continue to offer three PDPs each nationwide. Nevertheless, while slightly fewer stand-alone drug plans are available than in previous years, in 2025, the average beneficiary could still choose from 14 PDP options and 34 MA-PDs, down from 21 PDPs and 36 MA-PDs in 2024. Notably, while those numbers reflect the small reductions of MA plans open to general enrollment, they exclude sponsors’ expanded offerings of special needs plans for beneficiaries with Medicare and Medicaid and individuals with chronic conditions.
More beneficiaries would benefit from shopping
Every year, Medicare beneficiaries are sent an Annual Notice of Change outlining their Part D or MA plans’ changes in premiums, cost sharing, and coverage for the upcoming year and, in some cases, if the beneficiary will be affected by plan withdrawals or mergers. They are also reminded of the annual enrollment period when they can shop for different plans, use the Plan Finder tool at medicare.gov or call a SHIP office for help. Perhaps because there are so many options, few people compare plans. In 2022, less than a third of beneficiaries in original Medicare took advantage of their annual opportunity to shop.
The volume of calls to our SHIP offices for help comparing drug plans was roughly the same as last year, typically from a small minority of beneficiaries who shop each year. However, a few calls came from beneficiaries (like Marjorie) who read their Annual Notice of Change and found out that their drug copayments or plan premiums were increasing. If a plan is cancelled and the beneficiary doesn’t actively choose a new one, they will typically be enrolled in a PDP run by the same sponsor, sometimes at a higher premium. Similar situations have happened in past years, such as with Eunice, a retired nurse who, with SHIP help, found a plan that saved her hundreds of dollars.
Many more beneficiaries could find substantial savings from shopping, using either CMS’s Plan Finder themselves or asking for SHIP assistance to compare costs for plans that cover their medications. One often overlooked source of savings can come from using a plan’s “preferred cost-sharing pharmacies.” By filling prescriptions at the same pharmacy without comparing plan copayments at different pharmacies, beneficiaries can miss out on sometimes hundreds of dollars of savings over a year simply from switching pharmacies.
Among the beneficiaries we spoke with, many were confused about whether the new $2,000 cap applied to their cost sharing, premiums, or both. It only caps cost sharing. Some were also confused when the Medicare Plan Finder sometimes showed out-of-pocket costs well above $2,000. If a drug is not on a plan’s formulary, the beneficiary must pay the full cost and those expenses do not apply towards the out-of-pocket maximum. Few of our clients were aware of the Medicare Prescription Payment Plan that allows them to smooth cost sharing over the year.
We also found that some beneficiaries will pay far less than $2,000. For example, a client with a prescription for a blood thinner that has a full price of nearly $600 for a 30-day supply ($7,200 for the year) may pay just $520 in total cost sharing during 2025. This situation arises in enhanced PDPs—plans that cover supplemental benefits (eliminating the deductible or lowering cost sharing) beyond Part D’s basic coverage, but generally with higher monthly premiums. Under changes made in the Inflation Reduction Act, supplemental benefits count towards the cap as though they are part of an enrollee’s out-of-pocket spending. While beneficial to the enrollee, this means that far more beneficiaries are likely to reach the $2,000 cap than some might have thought. It will be interesting to see whether beneficiaries with expensive medicines increasingly gravitated towards these PDPs for 2025, as well as whether that affects the availability of plans with supplemental coverage in 2026.
What did Marjorie decide?
As for Marjorie, we talked over all her options, including MA plans in her area. She liked the fact that some MA plans had no monthly premium, but with the number of specialists she sees, Marjorie was concerned that the copayments for visits would add up. She would have to leave her ophthalmologist, who she especially likes; she had called the doctor’s office and found that he doesn’t participate in the networks of MA plans that have no premium. It was difficult to find out from the Plan Finder how much MA plans would charge for a wheelchair or other equipment she might need. If she joined an MA plan, Marjorie would no longer need to pay $400 a month for her Medigap. But if she gave up that policy and later wanted to return to original Medicare, she would likely have a very hard time purchasing a new Medigap. Even though her budget remains tight, for 2025, Marjorie decided to stay with original Medicare and her Medigap but enroll in a different PDP that would save her a little money. She also plans to revisit her decision next year.
Looking forward
The changes made in Part D for 2025 will have a significant effect for many Medicare beneficiaries in reducing their out-of-pocket costs. But others will probably fail to see the savings because they simply stayed in their plan without doing the shopping needed to move to a different plan. We also see many beneficiaries like Marjorie who are tempted by the savings available from enrolling in an MA plan, but they see downsides: being forced to leave a trusted doctor, worrying about whether prior authorization requirements may block them from needed care, and fearing that they cannot regain Medigap coverage if the MA plan doesn’t work out for them. The tools and support for shopping exist, but too often the information or the resources to find and use those tools do not. Ideally, Medicare should find better ways to encourage beneficiaries to make smart choices and to support them in those efforts.