The Centers for Medicare and Medicaid Services (CMS) have recently announced the new Medicare Part A, B and D premiums, deductibles and coinsurance amounts for 2025. These costs are updated yearly to align with annual cost-of-living adjustments (COLA) and are timed with Medicare’s Annual Enrollment Period (AEP) that began October 15.
Rising healthcare spending is driving this year’s Medicare premium adjustments. Meanwhile, some of the Inflation Reduction Act (IRA) rules that go into effect next year will have additional impacts. With the modest COLA of 2.5% for 2025, many beneficiaries will be more affected by the rise in Medicare costs.
What are the most significant changes in 2025?
There is no premium charged for nearly all with Part A (hospital insurance). Deductibles vary each year, and this year’s was adjusted to $1,676.
Part B (medical insurance) beneficiaries will see a premium of $185 for 2025, an increase of $10.30 from 2024. The annual deductible for all Medicare Part B beneficiaries will be $257, an increase of $17 from the annual deductible of $240 in 2024.
Part D changes were announced as part of several updates from the Inflation Reduction Act taking effect next year, the most important of which is the $2,000 limit on out-of-pocket drug spending. Given the IRA provisions that take effect next year, insurers will be expected to shoulder more costs. This means a rise in Part D premiums, deductibles and co-pays. To mitigate the potential impact on beneficiaries, the IRA adds a 6% cap to the base Part D plans. This means the Part D base premium will increase by $2.08 next year, from $34.70 to $36.78.
Why do Medicare premiums change each year?
Medicare premiums, along with any deductibles and coinsurance rates, are adjusted each year in accordance with the Social Security Act. For some “held harmless” beneficiaries, the rule protects their Part B premium from increasing more than the COLA increase in any given year. Part B premiums can be adjusted for those not in this category until they reach the “standard rate,” which differs each year.
Others may pay more than the standard premium for both Part B and Part D based on the income-related monthly adjustment amount (IRMAA), which assesses a beneficiary’s modified adjusted gross income (MAGI) going back the prior two years. The IRMAA is broken into five income brackets announced each year, typically maxing out at $500,000 for an individual and $750,000 for married filing jointly. The purpose of IRMAA is to distribute costs equitably among Medicare beneficiaries based on income level.
For 2025, the revised IRMAA brackets will affect more Medicare beneficiaries than ever before.
Determining the best Medicare options for you
Medicare’s Annual Election Period runs from October 15 through December 7. Consult a licensed insurance agent at Aevo Insurance Services, a division of Brown & Brown Absence Services Group, if you need guidance and support in assessing your individual coverage needs.
