Medicare Enrollment Opens Amid Coverage Turbulence, Uncertainty

Medicare open enrollment for 2025 begins Tuesday with fewer private Medicare Advantage plans and “Part D” prescription drug plans to cover the growing number of beneficiaries enrolling in the program’s bulging managed care option.

The retrenchment in plan offerings reflects continued efforts by the Centers for Medicare & Medicaid Services to phase in a series of MA-plan payment cuts after years of reported overpayments . The situation was exacerbated when insurers that mispriced their coverage to gain market share paid more claims as seniors sought more medical care after the Covid-19 pandemic, said Duane Wright, a senior analyst at Bloomberg Intelligence.

That “perfect storm” of policy, payment and market dynamics has caused some Medicare Advantage insurers to pull out of areas, reprice their products, or alter their benefits so enrollees “have more skin in the game,” Wright said. As a result, some plans—most of which cover prescription drugs—are trimming their supplemental benefit offerings and hiking premiums and out-of-pocket costs.

The reduction in coverage options comes at a precarious moment: as Medicare Advantage becomes the program’s primary coverage vehicle, more MA enrollees may be forced to seek new coverage as plan options disappear and provisions of the Inflation Reduction Act restructure the Medicare prescription drug benefit next year. The CMS maintains that plan selection will remain robust for most enrollees, but some aren’t so sure.

“What’s clear from the data is that millions of seniors are going to see negative changes to their Medicare Advantage plans—higher costs, fewer benefits, and plan closures—and it’s because of policy decisions in Washington,” said a statement from Rebecca Buck, senior vice president of communications for the Better Medicare Alliance.

Fewer Offerings

For years, MA plans were a growing source of profit for insurers like Humana Inc ., UnitedHealth Group Inc ., and CVS Health Corp . But the new regulatory and economic environment has changed things.

“CVS was most aggressive in cutting plans, offering 10% fewer” MA plans with Part D prescription drug coverage in 2025, said an analysis of CMS databy Leerink Partners. UnitedHealth cut similar MA-plan offerings by 5.4%, while Humana will offer 2.5% fewer plans, according to the Leerink analysis.

Unlike traditional fee-for-service Medicare, which pays for each medical service provided, Medicare Advantage plans receive a flat monthly payment to cover each beneficiary’s cost of care. The plans also provide supplemental benefits, like vision, hearing, and some dental coverage, that traditional fee-for-service Medicare doesn’t provide.

While more MA plans in 2025 will offer supplemental benefits related to food, transportation, and housing than in 2024, fewer will offer “long-term services and support-like benefits, such as in-home services and support, support for caregivers, adult day health, and social needs benefits,” according to an analysisby ATI Advisory.

Among Medicare Part D prescription drug plans, the number of stand-alone plans used by beneficiaries in fee-for-service Medicare will shrink 26%from 709 in 2024 to 524 plans next year, said Kylie Stengel, associate principal at Avalere, a consulting firm. The number of MA plans with drug coverage will fall 7% in 2025 to 3,246 from 3507 in 2024, Stengel said.

The decline in stand-alone plans reflects the continued growth of Medicare Advantage among eligible beneficiaries. The CMS estimates that MA enrollment will reach 35.7 million next year, or roughly 51% of Medicare enrollees, compared with about 50% for 2024.

In states like Oregon, Idaho, Utah and Arizona, beneficiaries could see only 12 to 14 stand-alone Part D plans compared to 15 to 18 in most other states, Stengel said. “That could lead to some disruption for enrollees if they’re in a plan that no longer exists for 2025,” Stengel said. “They’re going to have to either choose a new plan or be cross walked to a similar plan option that’s offered by their current plan sponsor,” Stengel added.

IRA Changes Coming

The reduction in coverage options comes as more Medicare Advantage enrollees may be forced to change their plans due to provisions of the Inflation Reduction Actthat will restructure the Medicare prescription drug benefit next year.

The IRA implements a $2,000 cap on out-of-pocket drug spending and offers an extended payment plan for Part D drugs. Those measures will cut drug spending for Medicare beneficiaries next year, but increase costs and coverage liability for Part D plans.

Beneficiaries will be able to choose from an average of 15 stand-alone Part D plans, and an average of 34 MA plans with prescription drug coverage. Average monthly premiums for all MA plans—including those with drug coverage—will dip from $18.23 this year to $17 in 2025, the CMS reported.

And the rebates that MA plans use to fund supplemental benefits actually increased slightly from an average of $209 per member per month this year to $210 in 2025. So 99% of MA plans will offer supplemental vision benefits, and 97% will offer hearing benefits and some dental benefits, the CMS reported.

Meanwhile, the average total Part D premium is projected to fall from $53.95 in 2024 to $46.50 in 2025. For stand-alone Part D plans, the total premium will drop from $41.63 in 2024 to $40 in 2025. After applying MA-plan rebates, the average Part D premium for MA plans with prescription drug coverage is projected to decrease from $15.56 in 2024 to $13.50 in 2025.

Patient advocacy groups say beneficiaries should pay close attention to their plan selections during the enrollment period that ends on Dec. 8.

“Formularies, pharmacy, networks and cost sharing for prescriptions might change, even if your premiums don’t,” Sue Peschin, president and CEO of the Alliance for Aging Research, said at a recent drug industry media briefing on the Inflation Reduction Act.

“If you’re a current Medicare beneficiary, you got to take a look at your present plan to make sure it will still provide the best coverage for your prescriptions at your preferred pharmacy next year.”

—With assistance from Nyah Phengsitthy