In 2020, Medicare provided health coverage for more than 62 million Americans. Health coverage through Medicare provides many necessary services for retirees including preventative care, physician services, and coverage during a hospitalization. These benefits are an important part of the retirement plan for many seniors, but Medicare also has associated costs including monthly premiums, deductibles, and coinsurance.
With inflation and the rising costs of medical care, Medicare costs also rise. In 2022, the share of Medicare Part A and Medicare Part B costs paid by beneficiaries will increase. The amount of those increases was recently released by the Centers for Medicare & Medicaid Services [CMS].
Changes to Medicare Part A Premiums and Deductibles
Medicare Part A covers inpatient hospital care, skilled nursing care, inpatient rehabilitation, and some health services. Those who have worked more than 40 quarters in their lifetime, or are married to someone who has worked more than 40 quarters, do not have to pay a premium for Medicare Part A. According to CMS, 99% of Medicare beneficiaries meet these criteria and do not pay a premium. However, there are still costs associated with Medicare Part A.
When a beneficiary is admitted to the hospital, there is a deductible which covers the beneficiary’s portion of costs for the first 60 days. In 2022, the deductible will increase to $1,566.
If a beneficiary’s hospitalization lasts longer than 60 days, there is a coinsurance amount for days 61-90. In 2022, the coinsurance amount will increase to $389 per day.
If the hospital stay lasts longer than 90 days, beneficiaries are entitled to 60 lifetime reserve days. In 2022, the cost of each lifetime reserve day will increase to $778. If a hospitalization continues after all lifetime reserve days are used, beneficiaries are responsible for all costs.
For skilled nursing, Medicare covers all costs for the first 20 days. For days 21-100, there is a daily coinsurance amount, and in 2022, that coinsurance will increase to $194.50. After day 101, beneficiaries are responsible for all costs.
See the table below for a summary of the increases.
Premium Changes for Those with Fewer Than 40 Quarters of Work
Those who are over age 65 and have not worked 40 quarters, or have certain disabilities, can voluntarily enroll in Medicare Part A. These individuals will pay a monthly premium. In 2022, the premium will increase by $28 per month to $499.
Those with some work history are entitled to a premium reduction. Beneficiaries who have worked more than 30 quarters or are married to someone who has worked more than 30 quarters, will pay a reduced premium. In 2022, this premium will increase by $15 per month to $274.
Changes to Medicare Part B Premiums and Deductibles
Medicare Part B covers certain services that are not covered by Part A. These services can include doctor visits, outpatient hospital services, durable medical equipment, and other health services.
Beneficiaries must pay a monthly premium for Medicare Part B. In 2022, the monthly premium will increase by $21.60 to $170.10 per month.
Additionally, the Part B deductible will increase from $203 in 2021 to $233 in 2022. This is the amount that beneficiaries must pay out of pocket before Medicare begins to pay.
The 14.5% increase in Part B premiums is the largest in the history of Medicare. CMS notes that the increase in Part B costs is attributable to rising healthcare costs, the need for additional contingency reserves to cover an expensive new Alzheimer’s drug, and congressional action to reduce Part B premiums in 2021 by spreading that year’s increase over several years.
Income-Related Monthly Adjustment Amounts
Beginning in 2007, Part B premiums are based on income, and about 7% of beneficiaries’ monthly premiums are increased due to income. For purposes of Income-Related Adjustment Amount [IRMAA], income is calculated using Modified Adjusted Gross Income [MAGI] which is reported on a beneficiary’s tax return 2 years ago.
MAGI is Adjusted Gross Income (line 7 of IRA form 1040) plus any tax-exempt interest (line 2a on form 1040). Although IRMAA is based on MAGI from 2 years ago, beneficiaries whose income has been reduced due to a life changing event, such as retirement, can file an appeal using form SSA-44. For more information about appealing IRMAA, contact a Meld Financial advisor.
See below for a summary of 2022’s monthly premiums adjusted for income.
Medicare Part D IRMAA
Medicare Part D provides prescription drug coverage. Premiums for Medicare Part D vary based on the plan. Since 2011, Part D premiums have been subject to IRMAAs. For about 8% of high-income beneficiaries, premiums are increased based on income. See below for a summary of Part D-IRMAAs.
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