Working Seniors See Changes to Medicare

Working seniors are seeing major changes to Medicare Part D that can impact their coverage for prescription drugs.
President Joe Biden’s Inflation Reduction Act (IRA) lowered Medicare’s drug out-of-pocket costs for many seniors, but there are some changes that seniors need to be aware of if they are still in the workforce.
Under the IRA, the definition of creditable prescription coverage changed, and some employer-offered plans no longer count, leaving some seniors to find new insurance options. The IRA has a $35 co-pay cap for insulin and a $2,000 maximum out-of-pocket drug cost in 2025.
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“For working seniors managing diabetes, this is huge,” Michael Ryan, a finance expert and the founder of michaelryanmoney.com, told Newsweek. “It means predictable costs and fewer tough choices between medication and other essentials.”
Part D Medicare covers insurance for prescriptions, but some seniors opt out if their employer’s health care plan covers these costs.
Under the IRA, employer-run plans need to be deemed at least as good as Medicare Part D to be determined as “creditable.” That means the prescription drug coverage part of a plan would need to pay at least as much as Medicare Part D.
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“The primary concern is that most employer group plans have combined health and prescription max out-of-pocket benefits which are generally higher than $2,000,” Chris Fong, a Medicare specialist and CEO of Smile Insurance Group, told Newsweek. “Thus, it would make the employer plan with max out of pockets higher than $2,000 unqualified as credible coverage and subject the Medicare eligible employee to the late enrollment penalty.”
If seniors delay enrolling in Part D and then find out that their employer’s plan is not creditable, they could face significant challenges down the line. Seniors risk lifetime penalties after signing up for Medicare, which can make health care costs skyrocket.
The late enrollment penalty occurs every month you are enrolled in Medicare if, after the initial enrollment period, you had 63 or more days without Medicare drug coverage or an employer-provided creditable drug coverage plan.
To calculate what type of penalty, multiply 1 percent of the national base beneficiary premium, which was $34.70 for 2024, by the number of months without Part D or creditable coverage. The monthly penalty would then permanently be set on your monthly Part D premium.
“The penalty is per month, is a lifetime penalty, and will only occur when they enroll into a Medicare plan covering prescriptions,” Fong said. “I have seen people with penalties upwards of about 135 percent, which amounts to an additional $46.85 per month when they enroll into a plan covering prescriptions.”
While companies are required to alert employees if their health plan is no longer deemed creditable, some seniors have reported issues with making the proper enrollment changes to avoid lifetime penalties.
The new creditable coverage definition goes into effect January 1, which is also when out-of-pocket maximums will be set at $2,000.
“This is just another reminder to seniors that your health insurance options when you approach retirement aren’t as simplistic as they once were and require some due diligence to find the right plan for you and your situation,” Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek.
“…You could face stiff penalties, and that’s not something you want in retirement. It’s pivotal you get with your employer and find out about your plan being creditable or not prior to any decisions you make.”