Health care is one of the leading concerns among individuals planning for retirement. With costs continuing to increase, and rising inflation weighing on purchasing power, planning for future health expenses is a key topic among individuals still in the workforce as well as those in retirement.
For those age 65 and older, Medicare forms the foundation of health coverage. Today, more than 67 million people are enrolled, and that total is expected to exceed 80 million in 25 years.
Medicare does not cover everything, and generally, supplemental coverage is needed. Many investors find it confusing to navigate the program. To understand the basics of how Medicare works, read Franklin Templeton’s flyer, “Three key things to understand about Medicare.”
Opportunity for change
Each year, Medicare holds an open enrollment period that allows participants to sign up or change existing plans and supplemental coverage. Enrollment is available for individuals age 65 and older, as well as people with disabilities.
According to AARP, many enrollees overlook this chance to save money and improve their coverage. The Kaiser Family Foundation notes Medicare participants could save thousands of dollars by choosing a prescription drug or Medicare Advantage plan that best fits their needs.
This year, the open enrollment period to select a 2025 plan runs from October 15 through December 7, 2024.
Medicare open enrollment: October 15 through December 7
Possible changes for retirees to consider
1. Switch to a different Medicare Part D plan
It is not uncommon for a Medicare Part D plan to change its list of covered drugs, which may lead to higher out-of-pocket expenses. Individuals on Medicare should closely monitor and analyze their “Plan Annual Notice of Change” document, which details any changes to costs and coverage for the upcoming year. The document is typically mailed by the end of September. Participants can also contact the provider directly. If the new drug formulary no longer covers essential prescriptions, enrollees may want to research other Part D plans that can address their needs. You can find the Medicare plan comparison tool, “Medicare Plan Finder,” online. Beginning in 2025, all Medicare plans will include a $2,000 cap on what you pay out-of-pocket from prescription drugs covered by your plan. The year 2025 will also introduce a new payment option to help manage out-of-pocket costs for drugs covered by your Medicare drug plan or Medicare health plan with drug coverage (like a Medicare Advantage Plan) by spreading the costs across the calendar year, called The Medicare Prescription Payment Plan.
2. Compare Medicare Advantage plans
Medicare Advantage plans are private plans that combine Medicare Parts A, B and D. They typically offer additional benefits such as vision, dental and hearing coverage. For 2024, the limit on annual out-of-pocket expenses is $8,850 for in-network services and $13,300 for in-network and out-of-network services combined.
Enrollment in Medicare Advantage plans has nearly doubled over the past decade, with many participants seeking the lower premiums and out-of-pocket costs, and more comprehensive coverage. Today, more than 32 million people are enrolled in Medicare Advantage (KFF). This represents a little more than half of the eligible Medicare population. However, like Medicare Part D, the drug formularies that companies use may change from year to year. As a result, retirees should make sure important prescription drugs are still covered under the plan. Also, because most Medicare Advantage plans are administered as health maintenance organizations (HMOs), plan participants should monitor any changes to their list of covered providers.
Lastly, those who have moved or are contemplating moving to a different state will need to determine if their current plan is available in their new home state. In addition, there may be plans available in your new home state that are better suited for your needs that were not available in your previous home state.
3. Change from Medicare Advantage to original Medicare (or vice versa)
While Medicare Advantage plans typically offer additional benefits not included with original Medicare, these services come with an important trade-off. Participants must receive services in network, or risk potentially high out-of-pocket expenses. Individuals who relocate or anticipate the need to receive care from out-of-network providers, may place a higher premium on flexibility than cost. Retirees switching from Medicare Advantage to original Medicare will want to add a supplemental Medigap policy to avoid the possibility of significant out-of-pocket costs.
Here’s a look at some of the differences in supplemental coverages: Medicare Advantage versus obtaining a Medigap policy.
Health care is part of a comprehensive plan
Maintaining adequate health care coverage is an important part of a comprehensive retirement plan. Unexpected medical bills can drain savings that otherwise could have been used for traveling and philanthropy, as well as leaving a legacy of wealth for family members. Working with qualified professionals during the open enrollment period may help improve coverage and manage future health care costs.
Check out the “Medicare and You Guide for 2025” for more detailed information.
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal.
Any information, statement or opinion set forth herein is general in nature, is not directed to or based on the financial situation or needs of any particular investor, and does not constitute, and should not be construed as, investment advice, forecast of future events, a guarantee of future results, or a recommendation with respect to any particular security or investment strategy or type of retirement account. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies should consult their financial professional.
Franklin Templeton, its affiliated companies, and its employees are not in the business of providing tax or legal advice to taxpayers. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties or complying with any applicable tax laws or regulations. Tax-related statements, if any, may have been written in connection with the “promotion or marketing” of the transaction(s) or matter(s) addressed by these materials, to the extent allowed by applicable law. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.
IMPORTANT LEGAL INFORMATION
This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. This material may not be reproduced, distributed or published without prior written permission from Franklin Templeton.
The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as at publication date and may change without notice. The underlying assumptions and these views are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region or market. There is no assurance that any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets will be realized. The value of investments and the income from them can go down as well as up and you may not get back the full amount that you invested. Past performance is not necessarily indicative nor a guarantee of future performance. All investments involve risks, including possible loss of principal.
Any research and analysis contained in this material has been procured by Franklin Templeton for its own purposes and may be acted upon in that connection and, as such, is provided to you incidentally. Data from third party sources may have been used in the preparation of this material and Franklin Templeton (“FT”) has not independently verified, validated or audited such data. Although information has been obtained from sources that Franklin Templeton believes to be reliable, no guarantee can be given as to its accuracy and such information may be incomplete or condensed and may be subject to change at any time without notice. The mention of any individual securities should neither constitute nor be construed as a recommendation to purchase, hold or sell any securities, and the information provided regarding such individual securities (if any) is not a sufficient basis upon which to make an investment decision. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments, opinions and analyses in the material is at the sole discretion of the user.
Products, services and information may not be available in all jurisdictions and are offered outside the U.S. by other FT affiliates and/or their distributors as local laws and regulation permits. Please consult your own financial professional or Franklin Templeton institutional contact for further information on availability of products and services in your jurisdiction.
Issued in the U.S. by Franklin Distributors, LLC, One Franklin Parkway, San Mateo, California 94403-1906, (800) DIAL BEN/342-5236, franklintempleton.com – Franklin Distributors, LLC, member FINRA/SIPC, is the principal distributor of Franklin Templeton U.S. registered products, which are not FDIC insured; may lose value; and are not bank guaranteed and are available only in jurisdictions where an offer or solicitation of such products is permitted under applicable laws and regulation.
Please visit www.franklinresources.com to be directed to your local Franklin Templeton website.
