How to shop for the best deal on Medicare health and drug plans in 2025

Medicare open enrollment begins Tuesday, and it’s shaping up to be a turbulent season.

Headlines in recent months have focused on the estimated 59,000 people in Minnesota who could experience network disruptions — and potentially lose access to their doctors next year — if they don’t switch Medicare Advantage insurers.

Yet these seniors and everyone else in Medicare have plenty of other changes to consider during what the federal government calls the “annual election period.”

“2025 represents a year of major changes in Medicare Advantage and prescription drug plans,” said Kelli Jo Greiner of the Minnesota Board on Aging. “It is in every beneficiary’s best interest to review their options.”

Here’s what you need to know about Medicare health and drug plan changes for next year before the sign-up period ends Dec. 7.

The big news is that Medicare “Part D” drug benefits are getting a lot richer thanks to a new $2,000 cap on out-of-pocket costs. This will put an end to the unlimited co-insurance fees seniors with large medicine bills have had to pay once they hit what’s known as the “catastrophic” layer of Part D coverage.

“For the most part, it will reduce their out-of-pocket costs by a significant amount. And for heavy utilizers, it could be a few thousand dollars per year,” said Chris Boles, vice president of Medicare products at Eagan-based Blue Cross and Blue Shield of Minnesota.

The drug benefit, initially introduced nearly two decades ago, brought an extra dose of complexity to Medicare, because seniors with prescriptions move in and out of various coverage layers as they use more medicine. Out-of-pocket costs for drugs change as the annual tab for a senior’s medications increases beyond certain financial milestones.

The new $2,000 cap will remove one of these layers. And another layer — the dreaded “donut hole” gap in Part D coverage — is going away, too.

There’s a lot for beneficiaries to like with these changes, yet the private insurers that sell Part D plans made adjustments to incorporate these benefits. And some of these changes could snag seniors if they’re not watching.

The number of stand-alone drug plan options in Minnesota and across the country, for example, is declining, and consumers, in some cases, will see higher premiums if they don’t make changes. Plus, a number of the remaining options will have drug deductibles that are new or bigger than they had been.

Citing these drug deductibles, analysts at Jefferies last month wrote that a news release from the federal Centers for Medicare and Medicaid Services (CMS) was “misleading by omission.”

“CMS claimed minimal benefit disruption by pointing to [certain] premiums actually decreasing and [supplemental] benefits being stable,” the analysts wrote in a research report. “That paints a picture of no benefit reductions at all, which simply isn’t the case.”

Yet Joshua Haberman, an insurance agent at Alexander and Haberman in Bloomington, said seniors should be optimistic about the Part D benefit changes.

“There’s a good chance if you’re on a stand-alone prescription drug plan that something is going to save you money,” he said.

Consumer advocates say seniors should check every year for changes in their Part D plan formulary, the list of drugs covered along with required copays. That’s especially true this fall, Greiner said.

“Formularies, we know, are going to be changing. They always do,” she said. “But they may be changing more than in previous years.”

A Minnesota Star Tribune review of Medicare Advantage and Part D insurance options found premiums for some of the most popular options across the state are generally holding steady or declining for 2025.

Even so, seniors should look closely at “some of the under-the-hood benefits,” said Ann Kinsella, a vice president and general manager for Medicare products at Minnetonka-based Medica.

“There’s going to be a lot of subtle changes underneath the surface,” said Jay Sivasailam, executive vice president and chief growth officer at Minneapolis-based UCare.

About 1.15 million people in Minnesota are eligible for Medicare, the government health insurance program for U.S. seniors and younger people with disabilities.

Historically, the program had two primary components — Part A for hospitalization and Part B for doctor visits — and these “original Medicare” benefits covered a great many, but not all, hospital and physician bills.

“For most services covered by Medicare, beneficiaries incur out-of-pocket costs such as a $1,632 deductible for inpatient hospital admission and an annual deductible of $240, after which a 20% coinsurance applies for physicians and other Part B services,” Paul Ginsburg, an economist at University of Southern California, co-wrote in an article this year for Health Affairs Forefront.

To handle these out-of-pocket costs, many seniors buy a Medicare Supplement policy — also known as a “Medigap” plan — from a private insurer to extend original Medicare coverage. Beneficiaries also can buy a separate Part D policy from a private insurer for prescription drug costs.

In Minnesota this year, about 200,000 people are buying Medigap policies. About 345,000 people have prescription drug plans.

A variation on original Medicare called Medicare Advantage is what’s commanded headlines in recent months. With Medicare Advantage, seniors opt to receive their hospital, physician and Part D drug benefits (in most cases) through a managed care plan run by a private insurer.

One of the big consumer benefits is that Medicare Advantage plans establish a maximum out-of-pocket limit on what seniors might owe for hospital and physician services. There’s not been a similar cap on drug costs with Part D benefits, until the new $2,000 maximum out-of-pocket limit on medications coming next year.

The new limit comes from recent federal legislation that also caps cost-sharing on a month’s supply of insulin at $35. The law, the Inflation Reduction Act, also provides certain adult vaccines at no cost and authorizes Medicare to begin negotiating the price of some prescription drugs with manufacturers.

About 625,000 people in Minnesota have Medicare Advantage health plans, which have steadily gained market share.

These health plans often have lower premiums compared with the upfront costs of a Medicare Supplement plus drug coverage. But the plans generally have fewer health care providers in their networks, and rules can significantly limit choices with health care providers.

In some cases, consumers will pay more out-of-pocket — perhaps significantly more — when going out-of-network. In others, clinics and hospitals won’t even schedule visits for patients in Medicare Advantage plans that lack network contracts with the health care providers.

Five health systems with operations in Minnesota have announced for 2025 they intend to go out of network with certain Medicare Advantage plans, potentially impacting an estimated 59,000 people. Another 4,500 or so beneficiaries recently learned Mayo Clinic and M Health Fairview will stop scheduling them after Dec. 31 because their Medicare Advantage plans lack network contracts with the health care providers.

These seniors can maintain access if they drop out of Medicare Advantage and return to original Medicare, but they might not be able to buy a Medicare Supplement policy. That’s because in Minnesota and most states, beneficiaries have what’s known as a “guaranteed issue right” to a supplement/Medigap plan only during certain limited windows.

At all other times, Medigap insurers can require applicants to fill out a health questionnaire and can deny coverage based on the responses.

“If the person is enrolled in a Medicare Advantage plan, and their health care provider pulls out of that plan, they do not have a guaranteed issue right for a Medicare Supplement,” Greiner said. “A lot of people think they do, and they don’t.”

Denying coverage based on pre-existing conditions disclosed on a health questionnaire is a process that insurers call “medical underwriting.” The federal Affordable Care Act eliminated this in other health insurance markets.

Minnesota is scheduled to block medical underwriting in the Medigap market in a couple of years. The Legislature in 2023 passed a law creating a new open enrollment period beginning Oct. 15, 2026, for Medigap plans sold with guaranteed issue.

The change is expected to boost Medigap premiums.

A report the state commissioned and published earlier this year forecast that with the status quo, average annual premiums in the Medigap market would grow to $4,510 by 2030. With the shift to open enrollment and guaranteed issue, premiums at that point could reach even higher, an average of $5,252.

“This change will allow any Medicare-eligible individual the opportunity to enter the Medicare Supplement risk pool during the open enrollment period and the ability to switch to other Medicare Supplement issues and plans, all without subject to medical underwriting,” the report read. “We expect the new enrollees coming to the Medicare Supplement market will have more chronic conditions and utilize more health care services than enrollees already in the risk pool.

“In addition, we anticipate some current healthier Minnesota Supplement policyholders may temporarily disenroll from their Medicare Supplement policy while knowing that they will be able to re-enroll when their medical needs become more complex.”

Open enrollment runs Oct. 15 through Dec. 7. The Medicare Plan Finder tool is available online at Medicare.gov. The federal government assists consumers over the phone at 800-MEDICARE (800-633-4227). Health insurance agents can help individual seniors, as well. Minnesota seniors can get help exploring options by calling the state’s Senior LinkAge Line at 800-333-2433.