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Key Medicare Changes for 2025: What You Need to Know

11/2024

By Charlotte Disley and Stetson Ponder

As we look ahead to 2025, some important changes are set to shake up Medicare. It’s crucial to understand how these updates might impact your coverage, costs, and access to healthcare. Here’s a straightforward overview of the upcoming changes that all beneficiaries should keep in mind.

Drug Benefits – Part D

$2,000 Out-of-Pocket Cap – One of the biggest changes in 2025 is the introduction of a $2,000 cap on out-of-pocket costs for Part D prescription drugs. Here’s how it breaks down:

  • Deductible Phase: If your plan has a deductible, you’ll need to spend up to $590 out of pocket before coinsurance kicks in.
  • Coinsurance Phase: After you hit that $590 threshold, you’ll pay 25% of the cost for covered drugs until your total out-of-pocket expenses reach $2,000.
  • Catastrophic Phase: Once you hit the $2,000 cap, you won’t have to pay anything else out of pocket for the rest of 2025.

Payment Plans – Starting in 2025, if you’re enrolled in a Medicare drug plan (or a Medicare Advantage plan with drug coverage), you can opt to spread your out-of-pocket drug payments throughout the year through the new Prescription and Copay Payment Schedule Option. There’s no cost to join, but keep in mind this option won’t lower your total drug costs—it just helps manage your payments better!

However, be aware that these changes might lead to some unexpected shifts. For instance, medications could be reclassified to tiers with higher copayments, or some might not be covered at all. It’s important to do your homework—check which prescriptions are included in your plan and get an estimate of their costs for 2025.

Medicare Advantage Plans – Part C

Increased cost of coverage – Medicare Advantage plans might also see higher costs or fewer coverage options due to expected decreases in government funding. Providers will take on more responsibility for prescription drug coverage under the new $2,000 cap, which could lead to changes in available plans.

Scrutiny of prior authorization policies – There is set to be more scrutiny of prior authorization policies by Medicare, which had seen a rise in denials for coverage in recent years. Medicare Advantage plans will need to assess how their prior authorization policies affect different groups and will be required to make this information publicly available on their websites. Responses to prior authorization requests must be given within seven days, down from the previous 14-day requirement.

Unused Benefits – Starting in July 2025, enrollees will receive notifications about any unused benefits in their plans. With an average of 23 supplemental benefits—like hearing aids, fitness programs, and dental services—available in many plans, it’s essential for participants to be aware of what’s offered. Last year, about 30% of Medicare Advantage plans had unused benefits, underscoring the importance of being proactive in managing your options.

Expanding Support in Other Areas

Enhanced Mental Health Services – The availability of licensed mental health professionals who are covered by Medicare is set to expand. This includes Licensed Mental Health Counselors (LMHCs) and Licensed Marriage and Family Therapists (LMFTs), and addiction counselors. This is a significant step toward improving access to mental health care for Medicare beneficiaries.

Family Caregiver Support – Earlier this year, a new program, Guiding an Improved Dementia Experience (GUIDE), was implemented to support patients with Dementia and their unpaid caregivers. GUIDE offers services including a 24/7 support line, a care navigator to help find medical and community-based services, caregiver training, and up to $2,500 per year for at-home, overnight, or adult day care respite services. Typically, patients and their caregivers won’t face copayments. In 2025, the GUIDE program is set to quadruple in size, serving far more of the population experiencing these challenges.

Stay Informed and Prepared

With these major changes on the horizon for Medicare in 2025, it’s vital for beneficiaries to review their prescriptions and healthcare needs to ensure continued coverage. Staying informed and proactive will empower you to navigate these updates and maximize your Medicare benefits.

Reach Out

If you have any specific questions about your situation or enrollment, please reach out to the Cahaba Team directly and we are happy to provide additional resources for Medicare related inquiries.

Sources

  1. https://www.aarp.org/health/medicare-insurance/info-2024/medicare-changes-coming-in-2025.html
  2. https://www.investopedia.com/major-medicare-changes-for-2025-8713206
  3. https://www.panfoundation.org/everything-you-need-to-know-about-medicare-reforms/
  4. https://www.nerdwallet.com/article/insurance/medicare/medicare-changing-2025
  5. https://www.usatoday.com/story/news/health/2024/10/15/medicare-enrollment-changes-for-2025/75671849007/
  6. https://www.wsj.com/health/healthcare/medicare-plans-are-making-big-changes-for-2025-heres-how-to-navigate-them-5c81fd05

Charlotte Disley and Stetson Ponder are Financial Planning Analysts in the Atlanta office of Cahaba Wealth Management, www.cahabawealth.com.

Cahaba Wealth Management is registered as an investment adviser with the SEC and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment adviser does not constitute an endorsement of the firm by the SEC nor does it indicate that the adviser has attained a particular level of skill or ability. Cahaba Wealth Management is not engaged in the practice of law or accounting. Always consult an attorney or tax professional regarding your specific legal or tax situation. Content should not be construed as personalized investment advice. The opinions in this materials are for general information, and not intended to provide specific investment advice or recommendations for an individual. Content should not be regarded as a complete analysis of the subjects discussed. To determine which investment(s) may be appropriate for you, consult your financial advisor.

Top 3 Actions to Take if Your Tax Outcome Was Unexpected

4/2024

Receiving a tax refund larger than expected or owing more tax than anticipated can both be surprising. Such scenarios often indicate discrepancies in your tax planning or withholding. Whether you’re puzzled by a hefty refund or a significant tax bill, here are three practical steps to manage and adjust your tax situation for future financial stability.

1. Reassess Your Withholdings

If your tax refund is larger than expected, it could mean that too much tax is being withheld from your paycheck. While a large refund might seem like a boon, it’s essentially an interest-free loan to the government. To optimize your cash flow throughout the year, consider adjusting your withholdings. You can do this by filling out a new W-4 form with your employer to decrease the amount of taxes withheld from your salary. This adjustment will increase your take-home pay, allowing you to invest, save, or spend those funds throughout the year instead of waiting for a lump sum refund.

Conversely, if you owe more tax than you anticipated, this could be a sign that not enough tax is being withheld from your earnings. In this case, you might want to increase your withholdings by updating your W-4 form. For instance, even if you’re married with kids, it may make sense to claim “Single” to ensure more dollars are paid in through payroll. This can help avoid owing a large sum when you file your next tax return, and it can also prevent potential penalties for underpayment throughout the year.

2. Review and Adjust Estimated Tax Payments

For freelancers, self-employed individuals, or those with additional income sources (such as rental income or dividends), large discrepancies in expected tax outcomes may suggest that estimated tax payments need adjustment. If you owe a significant amount, consider recalculating your estimated payments for the current year to better align with your actual income. This proactive approach can help manage cash flows more efficiently and avoid surprises in the next tax season. Conversely, if your payments are too high, reducing them can free up monthly resources for other financial priorities.

3. Consult a Financial Planner and a Tax Professional

Changes in income, life events (like marriage or having a child), or changes in tax law can all affect your tax liability. If you receive a much larger refund or owe more than expected, it may be time to consult with a financial planner and a tax professional. A professional can help you understand why your tax outcome was different than expected, provide guidance on adjusting your withholdings or estimated payments, and help you plan for future tax implications of any major financial decisions you anticipate making in the upcoming year.

In conclusion, an unexpected tax outcome, whether it’s a larger refund or a bigger tax bill, often signals a need for adjustments in your financial planning. By taking these steps, you can ensure that your tax withholdings or payments align more closely with your actual tax liability, avoiding surprises and optimizing your financial strategy for the year ahead. This approach not only helps in better managing your finances but also in making informed decisions that enhance your overall financial well-being.

Cahaba Wealth Management is registered as an investment adviser with the SEC and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment adviser does not constitute an endorsement of the firm by the SEC nor does it indicate that the adviser has attained a particular level of skill or ability. Cahaba Wealth Management is not engaged in the practice of law or accounting. Always consult an attorney or tax professional regarding your specific legal or tax situation. Content should not be construed as personalized investment advice. The opinions in this materials are for general information, and not intended to provide specific investment advice or recommendations for an individual. Content should not be regarded as a complete analysis of the subjects discussed. To determine which investment(s) may be appropriate for you, consult your financial advisor.

Ep. 14 – Retirement Readiness (Part 2)

Financial considerations before you make the decision to retire

Cahaba Wealth Management is registered as an investment adviser with the SEC and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment adviser does not constitute an endorsement of the firm by the SEC nor does it indicate that the adviser has attained a particular level of skill or ability. Cahaba Wealth Management is not engaged in the practice of law or accounting. Always consult an attorney or tax professional regarding your specific legal or tax situation. Content should not be construed as personalized investment advice. The opinions in this materials are for general information, and not intended to provide specific investment advice or recommendations for an individual. Content should not be regarded as a complete analysis of the subjects discussed. To determine which investment(s) may be appropriate for you, consult your financial advisor.