For retired Americans who receive Medicare, the new calendar year in January will bring with it some changes they will need to know about to help them manage their finances, as well as their health.
Generally speaking, hospital insurance is covered by Medicare Part A. Assuming people paid their Medicare taxes while they were working, a premium is not required. Deductibles, however, are often required during hospital stays.
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Outpatient and preventive costs are covered by Medicare Part B. In 2024, the standard monthly premium is $174.70. If a retiree has a higher income, that premium can also increase. This increase is the Income-Related Monthly Adjustment Amount (IRMAA).
The premium for Medicare Part B is expected to slightly increase in 2025, and an announcement from the Centers for Medicare and Medicaid Services (CMS) explaining the details should arrive soon.
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Medicare Part C, also called Medicare Advantage, is a Medicare health plan private companies offer that covers benefits typically included in Parts A and B. It often includes Part D prescription drug coverage as well.
And Medicare Part D drug coverage has a big change coming in 2025 that many Medicare enrollees will be happy to learn about.
New Medicare law caps prescription drug costs
A new prescription drug legal requirement will take effect next year, capping yearly out-of-pocket drug costs at $2,000.
This means that those enrolled in Part D coverage and whose annual prescription drug costs are higher than $2,000 will not have to pay a copayment or coinsurance for Part D drugs for the rest of the calendar year.
Another new payment option will take effect in 2025. Beneficiaries can now spread their drug costs across monthly payments throughout the year.
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Medicare will also cover more support for caregivers, such as training to increase their ability to improve care for enrollees. This includes a new pilot program for people with dementia and support for their caregivers.
And the Federal Employee Health Benefits program will offer coverage for U.S. Postal Service employees, retirees and their families through a new initiative.
Medicare Part D late enrollment penalties
There are some more details the CMS wants enrollees to know about Part D late enrollment penalties.
"You may have to pay a late enrollment penalty if you enroll at any time after your Initial Enrollment Period is over and there’s a period of 63 or more days in a row when you don’t have Medicare drug coverage or other creditable prescription drug coverage," according to medicare.gov. "You’ll generally have to pay the penalty for as long as you have Medicare drug coverage."
Medicare describes three ways to avoid paying a penalty.
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First, beneficiaries need to get Medicare drug coverage when they are first eligible. This applies even if the enrollee isn't currently taking any medications.
Second, recipients should add Medicare drug coverage if they lose other creditable coverage. If enrollees go 63 days or more in a row without Medicare drug coverage or other creditable prescription drug coverage, they may have to pay a penalty when signing up for Medicare drug coverage later.
Third, it is recommended that recipients keep records showing when they had other drug coverage and prioritize telling their plan about it.
More details on specific Medicare premium increases are expected later this fall.
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