When Can Medical Expenses be Deducted?

I am adding this new information to what we thought was a final copy (below) because of an article that appeared in the New York Times on Sunday, September 29th, entitled “Administration Staves Off Sticker Shock on Medicare Drug Premiums”. I also taped a short segment to be added before the video that was previously taped.

We were unaware that the administration is funneling billions of dollars of subsidies to insurers to moderate Part D premium increases for this year. The article refers to this decision as “savvy,” but let’s be clear, the move to the new $2000 out-of-pocket maximum was dramatic and political and the move to moderate premium increase notices the month before the presidential election is also political.

Our advice remains the same, be aware of the options available to you so that you can enroll in a new plan if that makes sense. And now, on to the copy written last week:

I taped the video that accompanies this copy in late September before Part D specific information for 2025 was available. It is typically available in early October with annual open enrollment beginning October 15th and ending December 7th for a January 1st effective date. As I write this copy, we have learned that AARP/UnitedHealthcare, which has offered three drug plans for many years, is eliminating its middle plan. That should result in a low premium plan with a limited formulary and a much higher premium plan with a more comprehensive formulary. We also learned this week that WellCare’s lowest premium plan 2024 plan, which has a monthly premium of $3.70 in New York, is offering that plan for 2025 for a monthly premium of $38.70.

For those on Medicare or an Advantage Plan with drug coverage, the new 2025 out-of-pocket maximum of $2000 taking effect on January 1st is a dramatic departure from the past. For the first seventeen years of its existence, there was no out-of-pocket maximum for drug coverage through a Part D Plan or an Advantage Plan. In 2024 the out-of-pocket maximum is $8000 but few will actually spend more than about $4000 due to the way discounts and rebates work in the Coverage Gap phase of the benefit.

Using my zip code to do a search on medicare.gov, there are 20 Part D Plans to choose from this year with monthly premiums ranging from $.50 to $155.80. As for Advantage Plan choices, in 2024 there are 31 plans with premiums ranging from zero to $160. It is often desirable to be on a high premium plan if that results in an expensive drug being covered on a formulary. But the drugs one takes change and formularies change and Plans may respond in different ways to this new out-of-pocket maximum.

It would have been logical to assume that in 2024, Part D premiums would increase. After all, going from no out-of-pocket maximum to an out-of-pocket maximum limits member responsibility, and one way for plans to counter that change would have been premium increases and increases in copayments. We did see increases but we also saw decreases, particularly with Wellcare, which reduced premiums to levels not seen before.

A logical assumption regarding Wellcare’s premium decrease was that this was an attempt to increase market share before increasing premiums for 2025 and that certainly appears to be the case based on the tenfold increase in the lower premium Plan. We generally don’t feel it’s necessary for those on inexpensive medications to do a drug review every year, but this year we think everyone should be reviewing their options.

All the complexity and gamesmanship involved in offering Medicare drug plans seems unnecessary and annoying. However, the good news is that Part D coverage over the years has vastly improved with the elimination of the donut hole and now a $2000 out-of-pocket maximum upon us. Anticipating higher copayments and coinsurance, many more Americans will reach the out-of-pocket maximum in 2025 as opposed to this year and have no responsibility for out-of-pocket expenses for a portion of the year. This is especially important for those living on a tight budget in retirement.

You can view Part D and Advantage Plans options on medicare.gov under Find Health and Drug Plans. If information is not available when this copy is delivered, it will be available any day now due to the annual open enrollment period beginning on October 15th.

Thanks for reading.