Medicare's Annual Notice of Change: Why it's a must-read for beneficiaries

If you’re on Medicare, you’ll be getting one or two Annual Notice of Change letters in your mail or email this September about your 2025 coverage and costs. You may be tempted to ignore what looks like junk, as nearly a third of recipients do, according to an eHealth survey.

Don’t.

“So often, a person who is quite happy with their plan and doesn’t bother to look at their Annual Notice of Change then gets a nasty surprise in January” when the plan’s new costs and coverage kick in, says Danielle Roberts, author of 10 Costly Medicare Mistakes You Can’t Afford to Make and founding partner of Boomer Benefits, which sells Medicare policies.

What is an Annual Notice of Change?

An Annual Notice of Change from your Medicare Part D prescription drug plan or a private insurer’s Medicare Advantage plan lays out how much your premiums, deductibles, and co-pays will differ in the year ahead and whether the plan will even be offered. (Medigap plans don’t send these notices because they don’t change much year to year.)

An Annual Notice of Change from your Part D plan also says whether your prescriptions will be covered and, if so, how much you’ll pay. A Medicare Advantage Notice of Change will tell you if your doctors and hospitals will remain in the plan’s network.

While this information is always essential to make smart choices during Medicare’s eight-week open enrollment period (Oct. 15 – Dec. 7), experts say reading your Annual Notice of Change is especially important in 2024.

“There is an excellent chance that something is changing on your plan,” says Roberts. “This year, more than ever, we can expect big changes in the plans.”

Surprising effect of the $2,000 prescription drug cap

That’s largely due to a major Medicare change coming in 2025: the new $2,000 cap on out-of-pocket costs for prescriptions covered by a Part D plan.

Since Part D health insurers will be on the hook for more prescription costs due to the cap, they’ll be looking for ways to compensate.

That could mean higher premiums (currently $43 a month for stand-alone plans, on average, according to KFF), deductibles, and co-pays—possibly substantially higher than in 2024.

“I have been very, very concerned about what the $2,000 cap was going to do to Part D premiums,” says Roberts.

The prescription drug change in 2025 could also lead to your Part D plan no longer covering certain medications you take or raising prices of ones it will.

Medicare Advantage plans—some facing profit squeezes currently—often include Part D coverage, so they may respond to the $2,000 cap by trimming or eliminating benefits to keep their popular $0 premiums intact, experts expect.

As a result, your Medicare Advantage benefits that original Medicare can’t offer—such as dental, vision, hearing, and gym memberships—could be less attractive than in 2024, or possibly gone entirely.

“It really will be important to understand what’s changing in the coming year in my current plan and does the plan still fit?” says eHealth CEO Fran Soistman. “Does it still provide the value that it did when I elected to go in it in the first place?”

Reading and understanding the Notice of Change

Your Annual Notice of Change will tell you—if you can understand it.

Only 36% of Medicare beneficiaries surveyed by eHealth said their Annual Notice of Change letter is “readily understandable.”

Figure on spending about 30 minutes closely reading your Annual Notice of Change to see exactly what will be different in 2025 and whether you’ll want to switch plans or coverage next year as a result.

During open enrollment, you can switch from your current Part D plan to another, from your Medicare Advantage plan to another, from Medicare Advantage to original Medicare as well as from original Medicare to a Medicare Advantage plan.

But don’t feel compelled to switch plans just because your Annual Notice of Change says your premium will go up a little or a benefit will be trimmed slightly.

“If there’s a modest benefit decrease or premium increase, but they’re satisfied with what the carrier is providing, people shouldn’t make a change,” Soistman says.

However, he added, if a medication you take will no longer be covered or your physician or hospital won’t be in network, that’s an important change that may persuade you to switch coverage.

The Medicare Plan Finder on Medicare’s site (Medicare.gov) will let you compare Part D and Medicare Advantage plans for 2025.

And, as Philip Moeller writes in the forthcoming revised edition of his book, Get What’s Yours for Medicare, if your Medicare Advantage plan won’t include your favorite doctor or hospital in its network in the year ahead, it’s legally obligated to work with you to identify other physicians or hospitals in its network that you’d like.

A new program to help avoid big premium hikes

To help prevent drastic Part D premium increases, the government’s Centers for Medicare and Medicaid Services recently threw a bone to health insurers with a premium-stabilization plan.

Medicare will provide a special subsidy to those insurers for 2025 in exchange for avoiding slapping members with exorbitant premium hikes.

“It should take what might have been a 40%, 50%, or higher premium increase down to probably 25%,” says Soistman. “It’s still going to be a bit of sticker shock when some people see how their premiums changed.”

Roberts says, “I’m still somewhat concerned about premiums, but I feel a little better after the stabilization program announcement.”

Getting help if your Medicare plan will change

After reading your Annual Notice of Change, you may want to get help deciding on the right Medicare plans for 2025 and to understand the implications of coming changes to your plans.

You can ask a Medicare broker or agent for assistance; there’s a directory at the National Association of Benefits and Insurance Professionals site. The sooner you do, the better, since agents and brokers will be swamped near the end of open enrollment.

“At Boomer Benefits, we have to stop taking new requests after Thanksgiving,” says Roberts.

If one of your prescriptions won’t be covered by your Part D plan in 2025, call your doctor to see if another covered medication would be okay or if you should find a new plan that includes it, Roberts advises.

For information about Part D and Medicare Advantage plans without purchase recommendations, try your State Health Insurance Assistance Program or visit Medicare’s site or call Medicare’s toll-free number, 800-633-4227.

More time for open enrollment?

Soistman believes all the changes coming to Part D and Medicare Advantage plans for 2025 will push back the arrival of the Annual Notice of Change documents to the last two weeks of September.

If so, this will give people with the plans less time than normal to read the notices before open enrollment.

The eHealth agency has asked the Centers for Medicare and Medicaid Services to extend open enrollment by about five days to give beneficiaries, insurers, and Medicare brokers more time. Boomer Benefits favors the extension, too.

So far, the government hasn’t responded to eHealth’s proposal.

Could the 2025 open enrollment become Medicare’s equivalent of the Department of Education’s FAFSA financial-aid form fiasco of chaos and confusion?

“I don’t think it will be quite as drastic. I think it is going to be a year of change, though,” says Soistman. “And change is hard for people.”