Seniors will see higher Medicare costs in 2025, as the average Part B premium is set to increase by 5.9 percent, the Centers for Medicare and Medicaid Services (CMS) announced this week.
That means the base monthly premium for Part B will be $185, up from $174.70 in 2024. And the premiums will cover roughly 20 percent of expected costs, leaving beneficiaries with the rest.
"These increases stem from inflation, medical advancements and demographic pressures," Michael Ryan, a finance expert and the founder of michaelryanmoney.com, told Newsweek. "Understanding why costs are rising—and how to prepare—can make a world of difference for retirees."
Medicare Part B, which covers doctors' services, outpatient hospital services, some medical equipment and home services, will also see deductibles rise to $257 from $240.
"For many, this could mean cutting back on discretionary spending or dipping into savings to cover medical needs," Ryan said.
And for Medicare recipients who end up in a hospital in 2025, the visit deductible will be $1,676 under Part A insurance, an uptick from $1,632 in 2024.
After 60 days in the hospital, the beneficiary will then have to pay $419 a day until day 90, at which point Medicare stops covering hospital stays.
Ryan said Medicare costs have grown because of innovative treatments, new drugs and advanced technologies.
"Drugs targeting obesity and chronic conditions are becoming more common yet remain costly for Medicare to cover," Ryan said, adding that baby boomers are aging into Medicare rapidly.
The Inflation Reduction Act (IRA) also introduced prescription cost caps, which could shift some of the cost burden to seniors.
"While this is great for beneficiaries, it shifts financial pressure to insurers, who may respond by increasing premiums," Ryan said.
Chris Fong, a Medicare specialist and the CEO of Smile Insurance Group, also said that because of the IRA, insurers have had to take on higher costs, which are then passed on to beneficiaries.
"It seems that these changes have stemmed from the Inflation Reduction Act that was passed in 2022, which increased the financial obligation of prescription payments to the insurance company from 15 percent when somebody gets to the catastrophic coverage stage to 60 percent," Fong told Newsweek.
Budgeting will be critical for many seniors, and many may be tempted to switch to a Medicare Advantage plan because of their lower premiums, Ryan said.
"Medicare Advantage may look tempting, but these plans can limit provider flexibility and add unforeseen costs," Ryan said.
With President-elect Donald Trump approaching his second term in January, seniors are also looking to see what his new administration does with Medicare.
"Trump has vowed not to cut entitlements, and I believe he will stand by that promise," Kevin Thompson, a finance expert and the founder and CEO of 9i Capital Group, told Newsweek. "If he attempts to reduce entitlements, the Republican Party risks alienating its base—a consequence they are unlikely to accept."
The increases to premiums are less than optimal considering the inflation seniors are already experiencing, said Elizabeth Ayoola, a personal finance expert at NerdWallet.
"Premium increases are oftentimes due to projected price changes, which are then passed on to Medicare enrollees," Ayoola told Newsweek. "With Trump kick-starting his presidency in the new year, we may see a shift towards Medicare privatization, which was one of his campaign positions. However, it's too early to tell whether those changes will leave the roundtable and become a tangible reality for Medicare enrollees."
If the proposed changes take place, we could see more Medicare users enrolling in private plans, Ayoola said.
"Although it may work out cheaper for some seniors, others could find themselves stuck with plans that don't adequately meet their health care needs due to limited networks and coverage," she added.
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