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It’s time for Medicare open enrollment, the few weeks between October 15 and December 7 when all current Medicare beneficiaries must make some important decisions about their coverage for 2025.

Even if you were perfectly content with your coverage this year, some big changes are coming that could be costly if you fail to take action. Here are two key items to review, and some advice:

For the first time ever, Medicare is setting a cap on out-of-pocket drug costs, at $2,000 per year. Those with Part D drug programs must check coverage for next year. I’m putting this first because everyone who has any form of Medicare needs to check to see if and how their prescriptions will be covered in 2025 — even people with Medicare Advantage plans that include drug coverage.

The fact that you cannot spend more than $2,000 on drugs next year means plan providers are dropping some drugs from their formularies, charging higher co-pays on others, and offering only generics. You might even switch Advantage plans for next year, based on their drug coverage.

Go to Medicare.gov and use the PlanFinder tool to insert your prescriptions and dosages. This information should be saved in your “My Medicare” account there, so you only need to update changes every year. Then carefully check to make sure you are covered and that your pharmacy is included. This year there’s a new prescription payment plan that lets you sign up to spread out your payments, in case you reach the $2,000 cap in the first few months.

Important: You need to sign up for Part B even if you do not currently take any meds, to avoid future cumulative penalties when you ultimately do need coverage.

This open enrollment period is also the one window to switch to a Medicare Advantage plan from Original Medicare (or switch back to traditional Medicare — with some limitations). You can also switch between Advantage plans, based on their new pricing, included networks, and drug coverage — as well as their updated Medicare star ratings.

Long time readers of this column know that I annually warn against using Advantage if you can afford the costs of Original Medicare. Those costs include Part B premiums, a supplement and a separate Part D drug plan, so those costs can add up!

And that’s why Advantage plans have captured half the Medicare market in recent years. They offer low (or zero) monthly premiums, and “extra” benefits such as dental and hearing. But what might not be so apparent is that you are restricted to their network of hospitals and physicians, and must get pre-approval for all tests and procedures. If you travel or are a snowbird, you’ll have to return home for covered in-network care, except in an emergency.

Since the Advantage plans get a fixed reimbursement from the government per beneficiary, these plans are incentivized to cut costs by limiting services. The difference is their profit. That pays for the commercials and the commissions to brokers and salespeople for their plans.

When costs go up, profits go down. And so do their stock prices. The shares of Humana have fallen by nearly half this year, after the company announced a huge drop in profits last winter. Just recently, Medicare downgraded its star rating on one of Humana’s largest Advantage plans for 2025, meaning they’ll get less reimbursement from the government — squeezing profits even more. The logical conclusion: fewer approvals for tests and services.

Medicare Advantage plans denied 3.4 million, or 7.4% of 46 million prior authorization requests in 2022, according to the latest figures from JAMA. Doctors are getting fed up with the second-guessing and resultant paperwork — and dropping out of networks. And do you want to be the patient when a prescribed test is denied by your managed-care Advantage plan clerk or AI model?

Advantage Plans work as long as you are well, and the plan continues to include your docs and hospitals. But all that changes if you become ill or have an accident. You are subject to an annual out-of-pocket in-network maximum spend of $8,850 in 2024. If you are ill and must pay that amount, it quickly wipes out the “advantage” of low or zero monthly premiums and two free teeth cleanings!

If you’re thinking of switching back to Original Medicare, think again. If you have a pre-existing health condition, you are not guaranteed coverage in the most comprehensive supplement, Plan G, as you are if you sign up within six months of going on traditional Medicare. So investigate supplements before trying to switch back. That said, even a lower coverage supplement may be preferable, because it gives you freedom of choice in your care.

It’s insane that seniors are required to do all this investigative work to plan for their healthcare, just when they are most likely to need it. The one place you can do your independent research is at www.Medicare.gov, where there is a surprisingly logical and helpful process to compare supplements and Part D programs based on your state of residence, costs and coverage. You can also turn to your State Health Insurance Assistance Program at www.shiphelp.org.

Now is the time to pay attention to Medicare, or for sure you’ll pay later. That’s the Savage Truth.

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(Terry Savage is a registered investment adviser and the author of four best-selling books, including “The Savage Truth on Money.” Terry responds to questions on her blog at TerrySavage.com.)

©2024 Terry Savage. Distributed by Tribune Content Agency, LLC.