It may be months before the calendar flips to 2025, but not for Medicare. The Centers for Medicare & Medicaid Services (CMS), which runs the program, just announced two major changes for 2025 you’ll want to know about. Next year, Medicare will also dramatically alter the maximum amount beneficiaries will need to pay out-of-pocket for their covered medications.
Here’s the lowdown on these three ways Medicare will operate differently in 2025 and what they’ll mean for you.
1. A crackdown on agents and brokers who sell three types of Medicare policies
Currently, salespeople sometimes get incentives like exotic vacations and hefty bonuses when they enroll Medicare beneficiaries into private insurers’ Medicare Advantage plans (alternatives to Traditional Medicare) or Medigap (Medicare Supplemental) or Part D prescription drug plans.
CMS hopes to end sales incentives in 2025 for Medicare Advantage and Part D plans. “This announcement is a big win for seniors because it strengthens protections against deceptive and high-pressure marketing practices,” Senate Finance Committee Chairman Ron Wyden (D-Ore.) said in a statement.
The new clampdown, in CMS’s 1,327-page final rule for Medicare in 2025, states that it aims to “ensure that agent and broker compensation reflect only the legitimate activities required by agents and brokers” selling those plans.
That means the salespeople can no longer be offered incentives to enroll people.
In addition, the rule says, Medicare middlemen known as Third Party Marketing Organizations won’t be able to offer incentives that “inhibit an agent or broker’s ability to objectively assess and recommend the plan that is best suited to a potential enrollee’s needs.”
Marvin Musick, whose MedicareSchool.com sells Medicare policies tells Fortune,
“I think it’s a really good idea, because the agents should not be incentivized to favor one company or another.”
The new rule also says it will stop brokers and agents from receiving “administrative fees” above Medicare’s fixed compensation caps. In most states, that cap has been $611 for new Medicare Advantage signups and $306 for renewals. Part D plans have had lower caps: $100 for initial enrollment and $50 for renewals.
In 2025, the government will increase the compensation for initial enrollments in Medicare Advantage and Part D plans by $100—more than three times higher than CMS initially proposed.
“It’s much higher than most people in our business were anticipating,” says Musick.
Consumer activists at the Center for Medicare Advocacy and the Medicare Rights Center believes that even with the rule changes, brokers and agents will still have a significant incentive to steer people into Medicare Advantage plans.
That’s because the rule will continue letting salespeople earn far more selling those plans than standalone Part D prescription drug plans, which some people with Traditional Medicare buy along with Medigap policies.
“This won’t really address the issue of pushing people to Medicare Advantage,” says David Lipschutz, associate director of the Center for Medicare Advocacy. “What I think it will do is restrict or limit people from being steered towards one particular plan because that agent or broker is trying to get a particular bonus or other incentive.”
Philip Moeller, author of the forthcoming book Get What’s Yours For Medicare, says the new rule “simply reinforces the need for consumers to ask some basic questions when they’re dealing with a broker.”
Agents and brokers don’t sell every Medicare Advantage, Part D or Medigap plan available in a local area, he noted, just a selection of them.
Once you know which plans your broker can sell, Moeller advised, “go to Medicare’s Plan Finder tool and look at the available products in your ZIP code and see what’s missing” from the salesperson’s choices.
2. A new midyear notification to Medicare Advantage policyholders reminding them about their plan’s unused supplemental benefits
That’s coming because people in these plans often don’t take advantage of some benefits.
This is somewhat surprising since Medicare Advantage plans often tout the coverage that they provide and Traditional Medicare can’t—dental, vision, hearing and fitness benefits. Most Medicare Advantage plans offer at least one supplemental benefit and the median number provided is 23, according to CMS.
But a February 2024 Commonwealth Fund study discovered that three in 10 Medicare Advantage members didn’t use any of their supplemental benefits in the past year. And CMS’ statement about its 2025 rule said that “some plans have indicated that enrollee utilization of many supplemental benefits is low.”
The Commonwealth Fund found in 2022 that supplemental benefits were the most common reason people cited for choosing a Medicare Advantage plan over Traditional Medicare.
So, starting in 2025, Medicare Advantage plans will be required to send policyholders each July a personalized “Mid-Year Enrollee Notification of Unused Supplemental Benefits.” It will list all supplemental benefits the person hasn’t used, the scope and out-of-pocket cost for claiming each one, instructions on how to access the benefits and a customer service number to call for more information.
Musick applauds this change but wishes Medicare Advantage members would get such letters quarterly.
Moeller thinks it might be better if the plans send the letters in March, “to give people more time during the year to actually avail themselves” of the benefits.
Why aren’t Medicare Advantage beneficiaries using their supplemental benefits?
No one really knows because there’s no good data about this. “The Medicare Payment Advisory Commission has said that CMS does not have reliable data about enrollees’ use of supplemental benefits,” says Lipschutz.
Experts believe there are three possible reasons for the low take-up of supplemental benefits.
One is that Medicare Advantage members can’t find a doctor or dentist they like who is in their plans’ network. So, they either can’t get coverage to see their preferred medical providers or the cost would be too steep.
Another possible reason: The supplemental benefit is too skimpy.
“Sometimes a dental benefit amounts to one or two cleanings per year, so it’s not much of a benefit,” said Lipschutz.
A third explanation is that people in the plans may be unaware of their supplemental benefits or how to take advantage of them.
“I think there’s a significant incentive on the part of plans to advertise the benefits when they’re trying to get you to enroll and less of an incentive to connect you with those benefits once you are an enrollee,” says Lipschutz.
Also, he notes, “there’s a whole subgroup of benefits that are only available to certain people with certain chronic conditions.”
3. The new $2,000 annual cap on out-of-pocket prescription costs.
In 2024, generally speaking, once your out-of-pocket spending on prescriptions tops about $3,300, you qualify for Medicare’s “catastrophic coverage” and pay nothing for your covered Part D drugs for the rest of the year. (In 2023, once you hit catastrophic coverage, you still owed 5% of your drug costs.)
But come 2025, people with Part D plans won’t have to pay more than $2,000 in out-of-pocket costs, thanks to a provision in the Inflation Reduction Act of 2022.
“I think this is a very big deal,” says Lipschutz.
This new rule only applies to medications covered by your Part D plan, though and does not apply to out-of-pocket spending on Medicare Part B drugs. Part B drugs are typically vaccinations, injections a doctor administers and outpatient prescription drugs.
The $2,000 cap will be indexed to the growth in per capital Part D costs, so it may well rise each year after 2025.
The $2,000 cap will likely save money for some Medicare beneficiaries, particularly ones taking expensive brand-name drugs.
But it’s quite possible the cap will have deleterious effects on people with, or looking for, Part D plans, too.
Experts think some health insurers will look for ways to compensate for their new, extra costs. That could mean more prior authorizations to get prescriptions, additional restrictions on which medications the plans cover and hikes in Part D premiums and co-pays. Or some combination of these.
Musick believes the $2,000 cap could even persuade some health insurers to stop offering Part D plans.
“We still have to see how these plans respond to the cap,” says Moeller. “However, drug companies and Part D plans are in business to make money and it’s hard to make money when you don’t sell stuff.”
Moeller believes that if the $2,000 cap causes Part D insurers to cut back on the prescriptions they cover, “there’s going to be a lot of heat from legislators and others to hold the plans accountable.”
The advice for people looking to enroll in Medicare Part D plans in 2025: Review your choices carefully, using the Medicare Plan Finder, to see whether the prescriptions you take will be covered by the plan.
If your plan won’t cover a medication your doctor wants to prescribe, Lipschutz said, “ask the plan for an exception request,” with backup from your treating clinician. “It’s worth trying,” he adds.
