Although the CDC predicted a decline in basic Medicare Part D premiums for 2024 due to the IRA, a recent report revealed an increase in premiums for Medicare Part D prescription drug plans in California, Florida, New York, Pennsylvania and Texas.
Although the Centers for Medicare & Medicaid Services (CDC) predicted a decline in basic Medicare Part D premiums for 2024 due to the Inflation Reduction Act, a recent report by HealthView Services revealed an increase in premiums for Medicare Part D prescription drug plans in California, Florida, New York, Pennsylvania and Texas.
This year’s Retirement Healthcare Costs Interim Data Report exhibited a notable rise for retirees.
With over 18 million Americans enrolled in standalone Part D plans, those opting for Medicare Part D from the three largest providers in each state can expect an average increase of 42% to 57% in plan costs for 2024 compared to this year, according to the report.
For high-end coverage, a rise is expected from 21% to 77%. In addition, Medicare Part B premiums are set to increase by 5.9% in 2024, accompanied by a 3.2% Social Security cost-of-living adjustment.
"Significantly more expensive premiums will come as a shock to the millions of retirees enrolled in Medicare Part D plans who, along with CMS, may have been anticipating lower costs with the introduction of the Inflation Reduction Act," said Ron Mastrogiovanni, founder & CEO of HealthView Services, in a press release.
"HealthView as well as other experts, including Kaiser Family Foundation (KFF), have been predicting that Inflation Reduction Act provisions, including changes to the cap on catastrophic coverage and cost sharing methodology between the government and providers, would lead to costs being shifted from carriers to retirees. This is what we are clearly seeing."
The report highlights the importance of considering changes in the context of overall healthcare expenses. This includes a number of elements such as Part B, supplemental insurance and all other out-of-pocket costs related to drugs, as well as expenditures on hospitalizations, doctors, tests, dental, vision and hearing.
As of 2023, Part D premiums make up about 9% of the total lifetime retirement healthcare costs for a couple. Expecting an increase in 2024, if this trend continues in 2025, Part D premiums could constitute over 14% of the overall healthcare costs, the study shared.
The rise in Part D premiums is expected to significantly impact the average $708 annual increase in Social Security benefits, even before factoring in higher Part B premiums and other expenses.
Though, for roughly 25% of retirees, the potential for increased premiums may be balanced by reduced out-of-pocket costs for drugs. This is due to the provisions of the IRA, which includes measures such as drug price negotiations, inflation-based price controls, and a reduction in maximum costs from $7,025 in 2024 to $2,000 in 2025.
"The 25% of retirees with out-of-pocket expenses higher than the new $2,000 cap may well realize savings on their out-of-pocket costs for medications as a result of these changes," Mastrogiovanni added. "With increased cost sharing and price controls on drugs over the remainder of the decade, while everyone will experience higher premiums, many will benefit from a lower rate of increase in out-of-pocket expenses than would otherwise have been the case."
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