CNBC’s recent article entitled “Here’s what you need to know about your 2020 Medicare costs” reports that Medicare will have some higher costs this year that you may want to factor into your health-care budget.
The Medicare program has about 61 million beneficiaries, most of whom are 65 or older. These people will see certain costs are adjusted by the federal government each year that can impact their premiums, deductibles and other cost-sharing aspects of the program. These changes don’t really involve big dollars. However, those affected should plan for how any increases will make a difference in their household spending.
For a person on a fixed income, all of the small changes can add up. Basic Medicare consists of Part A (hospital coverage) and Part B (outpatient care). Roughly a third of beneficiaries opt to get those benefits delivered through an Advantage Plan that’s offered by private insurers. These types of plans generally also include Part D (prescription drug coverage), and other extras like dental or vision. They also limit what you pay out of pocket for Parts A and B services.
Other beneficiaries go with the basic Medicare and buy a standalone Part D prescription drug plan. About a third purchase a supplement plan (“Medigap”) that covers some of the costs that come with basic Medicare, like coinsurance or copays.
Your coverage choices can play a part in the amount you pay in premiums, deductibles and copays or co-insurance. The frequency with which you use the health-care system can also add to your costs. Your income is another factor. Beneficiaries with limited income could be eligible for Medicaid or other programs that cover Medicare expenses. However, higher-income beneficiaries pay more for certain parts of coverage.
For those that fall in-between—a group who aren’t eligible for Medicaid or other types of assistance—every dollar is important.
Most Medicare beneficiaries pay no premium for Part A because they (or their spouse) have enough of a work history (10 years or more) of paying into the system through payroll taxes to qualify premium-free. If you don’t satisfy the minimum requirement, monthly premiums could be as high as $458 a month, based on whether you’ve paid any taxes into the Medicare system at all. That’s an increase from $437 in 2019. There are also cost-sharing aspects that go with Part A, despite whether you pay a premium.
As far as Part B, the standard premium in 2020 will be $144.60 monthly, an increase of $9.10 from $135.50 in 2019. Some recipients won’t pay the full standard premium due to a “hold harmless” clause that prevents their Part B premiums from increasing more than their Social Security cost-of-living adjustment (COLA). However, some people will pay more than the standard, due to income-adjusted surcharges.
The annual deductible for Part B will go up to $198 from $185 in 2019. Once you hit that deductible, you typically pay 20% of covered services. Note that beneficiaries in Advantage Plans may pay a different amount through copays, and Medigap policies either fully or partially cover that coinsurance. Even though Advantage Plan premiums differ among plans, the average for 2020 is $23. That’s a decrease of $27 from last year.
For Part D, the amount you pay for drug coverage depends partly on the plan you choose and your income. The average monthly premium for a standalone drug plan in 2020 will be $30— a few dollars less than the $32.50 in 2019. Higher earners will pay extra.
Those surcharges were set slightly downward.
Those charges are not included in your plan premium but instead come out of your Social Security check or through a bill. Although not everyone pays a deductible for Part D coverage (some plans don’t have one), the maximum it can be is $435 in 2020, up from $415 in 2019.
For those with high prescription costs, the amount that Part D enrollees pay out of pocket before qualifying for “catastrophic coverage” will go up to $6,350 in 2020 from $5,100 in 2019. In that phase of coverage, your share of prescription costs goes down.
Visit with your advisor to get individual advice.
Reference: CNBC (Dec. 30, 2019) “Here’s what you need to know about your 2020 Medicare costs”