#55 | 2025 Medicare Changes

Speakers: Jon Jag, Bruce Hosler, & Alex Koury

[Music Playing]

Jon Gay (00:05):

Welcome back to Protecting and Preserving Wealth. I’m Jon Jag Gay, joined by Bruce Hosler and Alex Koury of Hosler Wealth Management. Gentlemen, always good to be on with you.

Bruce Hosler (00:12):

Great to be with you this morning, Jon.

Alex Koury (00:14):

Same here, Jon.

Jon Gay (00:15):

So, we’re talking about Medicare today, and I want to say off the top. We’re addressing this for folks who are already taking Medicare, but also those who have not yet claimed Medicare. We have some information for both subsets of people here, so stay tuned because chances are we have something really important for you to hear no matter which camp you fall in here, Bruce.

Bruce Hosler (00:33):

Yes. So, we’re going to talk about changes that are coming for everybody claiming Medicare in 2025. Alex has identified some very important points. We want to let people know about that.

But the important one that I want to start with is for those people that may be turning 65. Here we are on the 17th of October, and the Medicare enrollment season has opened up, and the TV ads are going crazy with Medicare advertising, but we stumbled onto a nuance that I think is very important.

We had someone come into the office a while back, hadn’t claimed Medicare yet because he was on his company plan. Now, I think for many clients, we may encourage some people to stay on their company plan versus claim Medicare at 65. Why?

Because the company plan may be cheaper and they may be waiting until age 70 to claim their social security, but here’s how it may be cheaper.

I wrote the book, Moving to Tax-Free, and we’re all about helping clients move to tax-free. But the challenge with that is, as we convert IRAs to Roth and help them move to tax-free, well, we increase their income. And when we do that, we may be subjecting them to Medicare premium penalties that are called IRMAA (Income Related Monthly Adjustment Amount).

And if your income, if you’re married filing joint, your income pops above $206,000, you start being subject to a $244 a month penalty, a premium penalty per person. Husband and wife, it can go up to as much as $594 per month. That can get really expensive.

Folks, that is what I’m talking about, is a stealth tax. People don’t realize the government is going to increase your premium penalties. They’re not going to call it a tax, but that’s a higher tax. So, if you don’t get to tax-free, you could be subject to these penalties.

But what I need to talk to folks about is if you’re working for a company and you turn 65 this next year and you can stay with your company, there’s a little nuance in the law that you need to be aware of. And what that is, is high deductible health insurance.

Jon Gay (02:59):

Okay, explain that.

Bruce Hosler (03:00):

That allows you to have an HSA. Now, Alex, just give us a little refresher on the HSA. Clients can put money into an HSA plan, and how does it grow?

Alex Koury (03:11):

So, yeah, so the Health Savings Account, you make your contributions like you would, similar to your 401(k) or IRA contributions every year under an eligible plan that is a high deductible health insurance plan, but it allows you to keep some money in cash for any emergencies you may have for health insurance needs.

But on the other side of it, there’s an amount of money that can grow with investments in the stock market. So, it’s another vehicle that can be used for, again, increasing tax-free wealth when you use those funds for qualified medical expenses.

Bruce Hosler (03:44):

Yes, and Alex, it’s actually triple tax-free. You get a deduction when you put it in, you let it grow tax-deferred, and when you pull it out for medical expenses, it’s tax-free on the way out. It’s a triple tax-free product.

I love the HSA, but here’s the problem, folks; if you have a high deductible health insurance plan at work, you do not have what is called credible coverage for the Part D drug plan.

Now, let me just say that again — your plan may be credible coverage, which is what you have to have if you don’t claim the Medicare at 65, you stay on your company plan. You can have credible coverage for Part B, but the problem is, is if your plan is high deductible, then it definitely does not qualify for the Part D. You don’t have the credible coverage.

And what that means, is that it’s likely that you may have to buy a standalone Part D plan to make sure you have credible coverage and you’re not going to get penalized later for keeping your health insurance with your employer.

Jon Gay (04:53):

I want to recap what we’ve said so far because that’s a lot of really important information the two of you just covered.

Typically, you would claim Medicare at 65, but if you’re still working and you still are provided a health insurance plan at work, you can delay claiming the Medicare because you have the insurance. However, the part D, which correct me if I’m wrong, Bruce and Alex, it’s the prescription part of Medicare, right?

Bruce Hosler (05:13):

That’s correct.

Jon Gay (05:14):

If you have one of these high deductible plans, you may not have the Part D, which is of course, the prescription coverage. That means you wouldn’t qualify as having what they call credible coverage, and you may need to purchase a plan to cover you on the Part D to avoid any penalties for not taking Medicare.

Bruce Hosler (05:29):

And Jon, the insidious part of it is, hey, you can have good drug coverage on your company health insurance plan, but because it’s a high deductible plan, it does not meet the requirements for credible coverage for drug coverage under the Medicare rules.

So, even if you have drug benefits on your health insurance through work, it doesn’t meet the credible coverage for Part D. So, they’re going to force you to buy a Part D plan, and I don’t want our clients and our listeners to miss out because if they don’t buy that part D coverage, now every year that goes on, they’re subjecting themselves to a higher premium penalty when they finally claim it at age 70 or whatever when they go on Medicare. Now, their part D is going to be way more expensive if they did not start buying that at age 65.

Jon Gay (06:21):

That is really important. And if you’re confused by any of this, this is why we’re having this conversation. The team at Hosler Wealth Management can talk you through your individual situation, I’m so glad we’re covering this today.

Bruce Hosler (06:32):

Absolutely. Now, Alex has come up with some major changes in 2025, and potentially, how they’re going to impact your coverage. Alex, why don’t you start off with some of these changes that we see coming.

Jon Gay (06:43):

And I want to emphasize, this is the part — if you are already claiming Medicare, this is the part you really want to pay attention to.

Alex Koury (06:49):

That’s right. We’ve got a few different things we want to talk about here as well. One of them being the primary one as we talk about Part D Medicare insurance, is that there’s a new approach coming in 2025 that will replace confusing and frustrating Medicare Part D phases.

And the whole idea here though is what you want to know is that there’s a new hard limit of $2,000 per year and out of pocket Part D drug spending. So, that’s a big deal for a lot of people that maybe have very expensive medications, are concerned about just the rising cost in general of those medications.

Now, they’re going to introduce a new hard limit of $2,000 per year per person for your out-of-pocket Part D drug spending.

Bruce Hosler (07:32):

So, that’s their maximum annual copay on drugs. Is that right, Alex?

Alex Koury (07:38):

That’s exactly correct.

Bruce Hosler (07:40):

Starting in 2025.

Jon Gay (07:41):

I want to underscore that because this gets rid of the infamous “donut hole” where you hit a certain point, and your prescription costs change once you hit a certain threshold during the year. I’m speaking from experience of this because I have talked to my parents about this.

If I had a dollar for every time my mom has used the phrase “donut hole” in the last three years, I’d have a lot of donuts. (Laughter) This is huge that that’s going away.

Bruce Hosler (08:04):

Now, Alex, we’re not really fans of Medicare Advantage plans, but there’s some new stuff coming as far as the costs or reductions in coverage. Talk to us about that.

Alex Koury (08:16):

That’s right. So, if you do have a Medicare Advantage plan, these Medicare Advantage plans include prescription drug programs that may change or introduce new premiums, formularies, and copays. That means that you may be having to increase your drug deductibles or even reduce your benefits.

One of the bigger concerns about this is that some plans may be removing costly drugs from their formularies, and there is a list of covered prescription medications. So, there’s Federal rules that require some specific drugs be included in certain categories of formularies, but insurers could still make changes such as making you jump through more hoops to get that coverage.

So, you want to make sure that, if you’re one of those people that every year you automatically just re-enroll in the same plan, you’re going to want to review those new coverages and make sure that all of your prescriptions are covered and you’re aware of those potential changes in your deductibles and potentially, reduce benefits.

Bruce Hosler (09:12):

One of the things I want to address here for a second folks, is as far as regular Medicare goes, we’re fans of clients taking regular Medicare because if you go for one of those Advantage plans, now you’re kind of locked into kind of a PPO plan.

And here in Arizona, we have a really great medical facility in the form of Mayo Clinic, and if you have a serious cancer or something like that and you want to go to Mayo Clinic and you have a Medicare Advantage plan, it will not cover you, whereas they will accept regular Medicare.

So, if you’re about to claim this year, we want you to think very carefully, those Advantage plans sound very good and they may add some things that the other plan doesn’t, but we want you to be very cautious about what you’re accepting as your Medicare when you’re claiming that.

Jon Gay (10:03):

The Medicare Advantage has a lot of great benefits at the beginning, but as you get older and you need more care and you potentially need more medications, it kind of comes back to bite you on the back end. I’ve got to assume that’s why you’re not a big fan of the Advantage plans.

Bruce Hosler (10:18):

It’s just that they offer all these supposedly free things and it’s a sucker for the poor people is what it is. It suckers the poor people in to go into those plans.

If you’re traveling and you need coverage around the world or different things like that, it’s not near as good as regular Medicare. And a lot of doctors in that are not accepting Medicare Advantage. So, if you need a specialist — I mean, I used Mayo as an example, but if you need a specialist, there’s a high likelihood that you can’t go to California or go to Rochester and Mayo and get to the specialist you need to because they may not be accepting Medicare at that facility. That is not standard Medicare as opposed to Medicare Advantage.

Jon Gay (10:59):

And when you first enroll in Medicare is when you make that decision between Medicare and Medicare Advantage. That’s why this is so important that we’re talking about.

Bruce Hosler (11:06):

Absolutely. It is extremely important because once you make that choice, you really can’t go back.

Jon Gay (11:10):

Yeah, you’re locked in.

Bruce Hosler (11:11):

So, one of the next points is the standalone Part B and Part D. The premiums change every year, but there’s something here on the Part D plans, Alex, you want to talk about what they’re talking about there in 2025 as far as the price increases?

Alex Koury (11:27):

That’s right. So, we know that generally, I mean, premiums are going to go up every year with Part B, Part D, et cetera, but for Part D in particular, the plans were actually slated to increase premiums for millions of people who can’t really afford the price jumps.

There was a potential at the time to double or even triple the costs on an annualized basis. But this year, or for 2025 that is, the test that they’re trying to run for Part D year over year premium increases is capped at $35. So, for most people listening to this podcast, it’s probably not going to be a huge deal to you.

But if you are listening, you’re thinking about, “Geez, how am I going to afford all these extra premiums?” Know that for 2025, Part D year over year costs will be capped at $35 raise.

Bruce Hosler (12:15):

Okay, but we have some other standalone costs, Alex. What are they talking about on new deductibles and formulary drug tiers that are coming next year as well?

Alex Koury (12:27):

That’s right. So, if you have a Medicare Plan D that’s sold outside of a Medicare Advantage plan, let’s just say, the premiums aren’t going to change a whole lot there. But as Bruce was alluding to, you may see new deductibles and the formulary drug tiers that can change your makeup and the cost.

And what that is referenced to, is the benefits scope of what you’re actually going to receive, the cost sharing for those benefits that you’re going to participate in.

Bruce Hosler (12:52):

So, Alex, I just want to reiterate to folks that they are now in part D, they’re adding tiers three, four, and five to different drugs depending on how expensive they are, and you may have a percentage of the cost that you may now have to share as a co-insurance versus a flat copay according to the Secretary Rubin that was announcing some of this information.

Jon Gay (13:15):

Guys, some of this stuff is really difficult to comprehend. There are so many variables here, and I want to drill down on one thing here — we talked about the percentage of some of these medications going up. Could that then go over that max out of pocket we talked about earlier?

Bruce Hosler (13:30):

I don’t know that it can go over the max, but it just means that the copay or the flat pay that they were paying, if you have a $6 copay, it could now go to $20, $30, $50. You don’t hit your $2,000 for the year, but you could be paying $400, $500, $600, $1,000 dollars when you were only paying $20 a month.

Jon Gay (13:49):

Got it. Okay.

Bruce Hosler (13:51):

So, I guess our last topic, Alex, that we want to cover is that they’re adding some access to mental health as a benefit in Medicare now, especially to mental health care professionals starting in 2025. Do you have some insights on that?

Alex Koury (14:05):

That’s right. So, starting this new year as well, more mental health providers actually can enroll as Medicare providers, which is great. And that includes addiction counselors, licensed mental health counselors, and marriage and family therapists just as well.

So, they’re trying to bring more to the table, add more value in a very important area of life that really, more and more people are struggling with on a daily basis when it comes to mental health, and being able to have those resources really is important for everyone’s well-being, especially in those later years in life.

Bruce Hosler (14:38):

We hear of the grey divorce. We hear of the depression that many people are feeling. We understand the importance of family counselors and mental health counselors and addiction certainly with everything going on in the country.

So, I think this is fantastic news, and this is now being included in 2025 for mental health providers. This is a fantastic new benefit.

Jon Gay (15:02):

I will say that as awful as COVID and the pandemic were, one of the silver linings that came out of it, is I think it put a bigger spotlight on mental health. I think we’re talking about it more since 2020, and apologies because I’m going to stereotype a little bit here.

I think younger generations are more apt to talk about their mental health than older generations sometimes are. So, knowing that this is going to be a benefit for those on Medicare is just absolutely huge.

Alex Koury (15:29):

Absolutely, absolutely.

Bruce Hosler (15:31):

Well, folks, I hope this is helpful. We would be glad to answer any questions, but we’re trying to give you some heads up on some change coming on Medicare, and we think they’re very important for you to know.

Jon Gay (15:42):

Alright, and if any of our listeners want to talk to you guys and the team at Hosler Wealth Management, I mean this is really dense stuff and isn’t hard to talk to somebody who works in it every day. How do they reach you at Hosler Wealth Management?

Bruce Hosler (15:54):

They could certainly reach us at the website at hoslerwm.com, or they can call us at either office in Scottsdale, (480) 994-7342 or in Prescott, (928) 778-7666.

Jon Gay (16:13):

Really important stuff today. I’m glad we covered this gentleman. We’ll talk again soon.

Bruce Hosler (16:17):

Alright, thanks, Jon.

Alex Koury (16:18):

Thanks, Jon.

Jon Gay (16:20):

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