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Welcome to AICPA's Personal Financial Planning Podcast. This is Kerry Sennett. On behalf of the AICPA Personal Financial Planning Division, the home for professional personal financial Planners, we're happy to bring you insights from experts in tax, retirement, estate, investment, risk management, practice management and client relationships. Be sure to Visit us@aicpa.org Pfp to find more resources and tools designed to help you guide your client. And now, over to our guest.

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Thanks, Gary My name is Jim Sullivan. I'm with payforcare.org that's pay the number4care.org we are a nonprofit agency that works with individuals on their Medicare choices. Today I will be talking about some of the changes happening with Medicare that you will want to know about. The purpose of my podcast is to review some of the important changes being made to Medicare prescription drug coverage in 2025. This discussion includes both standalone Medicare Part D prescription drug plans and Medicare Advantage prescription drug plans. The most publicized change is probably the new $2,000 out of pocket maximum on prescription drug coverage. The out of pocket maximum is new to the Medicare Prescription Drug program. Before the change in the law, the plan participant did not have the benefit of a maximum out of pocket amount and if he or she was taking very expensive drugs, they could be out of pocket at almost unlimited amount during the year. This is overall a good change, but we're going to talk about how it works and then we're going to talk about some plan features that had to be changed because of the new maximum out of pocket amount. Another change is to smooth out the amount beneficiaries have to pay for their Part D out of pocket costs, including their deductible, which in 2025 is $590. Beneficiaries may elect to have their prescription drug costs spread evenly throughout the year. This is referred to as the Medicare Prescription Drug Payment Plan. The beneficiary may arrange to pay as much as $167.67 per month to the insurance company. You multiply that amount by 12 and get $2,000. This helps the beneficiary to smooth out the high cash payments that were sometimes due. Because of the way the annual deductible works, it has to be paid early in the year and the CO payments and coinsurance when those were combined with the annual deductible early in the year, meant that the Fed January and February might be higher cash amounts due than the beneficiary could really afford. Further changes to the drug prices are paid by the beneficiary as the beneficiary moves through the three phases of of Part D coverage. So we'll talk about that a little bit. The structure of Part D is now simplified. The three phases include the annual deductible phase as number one, the initial coverage phase number two, and the catastrophic coverage phase number three. Now, as you can imagine, the catastrophic coverage page is when the beneficiary reaches his or her maximum out of pocket, in which case the amount they pay for any of the drugs they prescribe are $0. If you're not become familiar with the publication by Medicare called Medicare and you 2025 to get more information on the payment plan and on the maximum out of pocket amount, it's found at www.Medicare.govMedicareandU. note that the insurance company will not ask the beneficiary if he or she would like to participate in the new Medicare prescription payment plan. The beneficiary must initiate participation in the plan. Here's just a few important points about the topic we just covered. The out of pocket maximum only applies to the prescription drugs on the beneficiary's plan formulary, so if he or she purchases a prescription drug outside parameters of the plan, that won't count towards the out of pocket maximum. The maximum does not apply to the monthly premium, so that's paid during the year and isn't added to the out of pocket amounts to determine whether you've hit the maximum. For most beneficiaries, let's face it, $2,000 is still a lot of money. For that reason, many beneficiaries should determine if they are eligible for programs that help pay for their health and drug costs. Go to page 91 of Medicare and you 2025 to get more detail on this important topic. Now we're going to talk about how to frame this to your clients when you're talking to them. And that involves understanding the importance of doing an annual review during the Medicare Open Enrollment Period. What does that mean? The Medicare Open Enrollment Period takes place every year from October 15 through through December 7. Decisions regarding any changes to coverage are effective on the first of next year for the annual Open enrollment period for 2025. The annual enrollment period begins on October 15th, ends on December 7th. Any changes made to coverage take place on January 1st of 2025. You should encourage your clients to use the Open Enrollment Period every year to review their Medicare coverage and determine if new coverage is required due to the changes in their health or changes in their current plan features. Unfortunately, only a small percentage of beneficiaries in the Kaiser Family foundation or KFF estimates that only 29% actually review their Medicare coverage for the next year. You can do your clients a big service by suggesting they use the open enrollment period to review their coverage. And if they haven't done it for many years, they may be surprised at how out of date their coverage is and the benefits they'll get from changing that coverage for the next year. Tell them that for any year, changes may be made to any of several plan features that potentially make a change to coverage desirable. Let's look at some of those. Premium Can Change the Deductibles Change now in 2025 I mentioned the deductible is $590. Plans do not have to charge a full deductible. They can charge less, but they can't charge more. So in any given year, the deductible may be changed by the plan, either as a result of the law that increases the deductible or because the plan has made a business decision to increase or decrease the amount of deductible for the next year. Out of Pocket Co pays and coinsurance can change every year, and we'll talk about that a little later. That can profoundly impact how much your client pays for their drugs. The formulary may change the formulary includes all the drugs that are on the plan's list and will be part of or be included calculating the maximum out of pocket for the year. So not all plans have the same formulary. Which plan may be the best for a particular client depends a lot on which drugs they take. That's why even a husband and wife who take different drugs may find that the same plan doesn't fit them, so they each have different plans to meet the payments of their current prescription drug requirements. Pharmacies or provider networks may change and restrictions may be imposed or removed from certain drugs. Restrictions are simply parameters that the drug puts around certain drugs. For example, certain expensive drugs, may require that the plan receive a request and issue a prior authorization that the beneficiary can order the drug. Step therapy means the plan will talk to the doctor and suggest that initially cheaper drugs be used, and if those are effective, those drugs will remain on the prescription list for the beneficiary and quantity limits. So an expensive drug, instead of being able to order 90 tablets, they may reduce it to 30 tablets for every prescription. So restrictions are important part and often overlooked by clients, but they can be changed every year. The open enrollment plan applies to standalone Part D prescription drugs and Medicare Advantage plans offered with drug coverage Some Medicare Advantage plans do not come with drug coverage and so they wouldn't be impacted by these prescription drug rules. The open enrollment period does not apply to Medicare supplement or what are otherwise known as Medigap plans. Changes to the Medigap plans can be made at any time of the year. This is probably the question I get asked most often, Do I have to make a change to my Medicare supplement plan between October 15 and December 7? The answer is no. Now, a desired change to Medigap plan coverage may require that the beneficiary answer health questions, and there's a possibility that the change in coverage is denied by the insurance company due to a pre existing health condition. So let's talk briefly about why the open enrollment period is so important. As described earlier, many changes are being made to prescription drug coverage in 2025. The maximum out of pocket limit has received the most attention. That is because in almost 20 years of Medicare prescription drug coverage, there has been no Medicare maximum out of pocket. Overlooked, however, are many changes that may be more detrimental to the beneficiary than the out of pocket limit is beneficial. We are going to look carefully at these overlooked changes during the remainder of this podcast. We will focus on Many plans will be terminated in 2025. Important Prescription drugs are being removed from some formularies and finally, many plans are moving away from CO pays. A copay is a fixed dollar amount like $45 paid is a fixed dollar amount that doesn't vary month to month versus a coinsurance which is a fixed percentage of the drug's cost, which will vary by the retail cost of the drug paid by the insurance company. So in our example, if a drug costs say $1,000, 45% of that is the coinsurance. The amount paid for by the beneficiary would be $450. Let's first look at plans terminated in 2025. It is estimated that 25% of the standalone Part D plans available in 2024 will not be available in 2025. Let's look at a real life example. In 2024, SilverScript, which was one of the largest Part D drug plan companies, offered three plans. Their SilverScript Choice plan, SilverScript Smart Saver plan and the Silver Script plus plan in 2025. Only the Silver Script Choice plan will now be offered. The monthly premium will be increased to $44.90 from $39.40 paid in 2024. The deductible will be $590. Now what happens when a plan is terminated? When a beneficiary's plan is terminated, he or she will be what's called crosswalked or transferred to another plan that the insurance company has selected. The crosswalk takes place automatically whether the plan is a standalone Part D plan or a Medicare Advantage plan. During the open enrollment period, the beneficiary may opt to to transfer to another plan that better meets his or her needs rather than accept the crosswalk. And that is also an important point to mention to clients. A lot of clients aren't even aware that their plan is being terminated for the next year. Every year, clients will receive what's called an annual notice of change from the insurance company, telling them important changes that are being made to their plan for the following year and termination will be mentioned in that notice. A lot of clients, however, don't read the notice and then in January they're surprised when they find out they've been moved to another plan that they weren't even aware of. And that plan may not be the best plan available for him or her. Let's talk about some other plans that have been terminated. Mutual OMaha has offered three plans in 2024. They will be offering no plans in 2025. ARP has reduced its offering from three plans to two in 2025. So make sure your clients understand that termination of their plan is possible and that they review their annual notice of change to find out if that's going to occur. The next topic that I mentioned earlier, important prescription drugs are being removed from plan formularies. Let's look at a recent live case. A client called his advisor, excited that his Part D plan premium had been reduced from $39 per month in 2024 to $20 per month in 2025. But his advisor told him not to get too excited. First, she suggested let's look and see if there were any other changes to the plan, particularly to the plan's formulary. Now, unfortunately, this client had been diagnosed with pancreatic cancer earlier in the year. Extensive surgery in the summer gave him some hope that he would have another two or three years of life, his doctor prescribed Zen Pep. This drug helps patients absorb nutrients from their food, making up for their pancreatic insufficiency. To do that job due to their cancer and the surgery, as it turned out, zenpep was removed from the client's current Part d plan for 2025. Now, in 2024, under the terms of the client's plan, Zentp was considered a Tier 4 drug. Tiers are the way insurance plans arrange the different drugs, typically at the low end of the tier tier 1. Those are the generics, the cheapest drugs and you can go all the way up to tier 5 and 6 drugs. For specialty or biological drugs, Zenpep was expensive. It was a Tier 4 drug or a non preferred plan drug. During the initial coverage phase under the plan the beneficiary paid 42% of the 1,366 monthly cost or $571. During the next plan phase, the beneficiary paid 25% of the cost or $371 in 2025. However, the beneficiary would pay the full 1,366 retail price of the plan. Unless of course you could purchase the ZENPEP from another provider through the use of a discount card, for example GoodRx, which you may have heard of single care, but fortunately before that had to be considered as an alternative. The advisor did the research and found plans that were available in the client's geographic area that still included Zenpep in the formulary, which is certainly good news under the circumstances. Now what about moving from CO payments to coinsurance? As I mentioned earlier, a CO payment is a dollar amount, a flat dollar amount the plan beneficiary pays toward the cost of a prescription drug. For example, many plans will charge $47 towards a payment on a preferred Tier 3 plan drug I mentioned. The plans can divide their tiers in different ways so every plan isn't exactly the same tier as every other plan, so that has to be looked at carefully. Alternatively, coinsurance is a percentage of the cost of the drug paid by the insurance company. In our Zenpep example mentioned earlier, if the drug were subject to a CO payment, the beneficiary might pay $47 per month for the drug subject to a coinsurance. However, the beneficiary pays the $571 I mentioned earlier and $371 in a later phase of the drug plan each month for the drug depending on the payment phase. So you can see why a flat dollar amount is preferable depending on the price of coinsurance and that has to be looked at carefully. Now because many plans are moving to coinsurance payments in the higher tiers which make those drugs more expensive but will also get your employee to the $2,000 maximum out of pocket quicker. Let me mention one other issue quickly. For many of you, your clients may have remained in a employer plan or work plan they had been in previously because it was considered creditable. Credible means that the plan was as good as or better than Medicare prescription drug coverage in 2024. If your client was in a credible plan, then whenever or if they ever rolled over to a Medicare Part D plan, they were not subject to the late enrollment penalty because they were in a plan that was just as good as or better than the Medicare plan. So that was important. And typically the plan would provide a letter to the beneficiary from an actuary that would tell them that your plan is considered credible, as good as or better than Medicare Part D. And do we advise the client keep that letter in case you're ever looked at or you transfer to a Part D plan and Medicare wants to impose a late penalty on the premium you're going to pay for the Medicare Part D coverage next year. With the imposition of this maximum out of pocket amount, the client will want to call the plan sponsor and ask is the plan still credible? In other words, if it's still as good as or better than Medicare Part D, because the work plan may not have an out of pocket maximum. So a quick call to the plan sponsor and they will probably tell you that a letter is on its way. So my strongest advice is that all Medicare beneficiaries should use the open enrollment period to review their coverage. This is especially important for 2025 to review their coverage and have changes made. Any changes they think are necessary by December 7th of this year. And just a word of caution, don't wait until the last minute to do this. If you're going to have your clients review their coverage, do it before, preferably December 1st, so the changes can be thought through, made and submitted without having to do rushing at the last minute where mistakes can be made or quite possibly the change doesn't get recorded properly and there's no record of it. So have your client try to do this early rather than later. The most important thing is not necessarily the cost. The most important point to me is that our clients get the coverage for the type of care they want if they ever become seriously ill. Second, you want to make sure coverage they purchase is most cost effective. But to me the most important thing is the care they're going to receive. Secondly, it's the cost. Now, if you're not familiar with the Medicare rules yourself, work with a Medicare advisor, either a salesperson that you may have confidence in or a growing number of Medicare fee only advisors that don't sell insurance but will do the analysis for a fee every year. Use the open enrollment period. Start as a reason to contact your client. I know most advisors look for reasons to call their clients and make contact with them throughout the year during the open enrollment period. That's a great time to call your client. Just remind them that the open enrollment period is either starting soon or maybe already underway, and that they may want to review their coverage so they make any appropriate changes before December 7, preferably late November, so everything gets done properly. Now, if some of your clients are in their 40s or 50s and aren't on Medicare yet, they may have elderly parents that you can offer the same advice. Remind their parents to do the review and either work with a fee only Medicare Advisor or with a Medicare Sales professional the Trust to review their coverage. Thank you for your time today. The AICPA's PfP division has additional resources for its members that cover this topic. They include the Retirement Healthcare Coverage Guide as well as the Health Transitions Guide to give you specific insight when you need it. Thank you for listening. And now Carrie, back to you.