For many people, turning 65 provides one of the keys to retirement: access to affordable healthcare. Whether you’re enrolling in the Medicare program for the first time or have been a Medicare enrollee for years, it’s important to stay on top of current offerings, costs, and enrollment dates so that you can select the plan that best fits your needs. Learn more about some of the recent changes to the Medicare program in 2021.[1]
Premium and Deductible Increases
Medicare recipients have Part A (hospitalization) and Part B (doctor and health care provider) coverage. Parts A and B are often called “Original Medicare.”[2]
For 2021, the standard Medicare Part B premium has increased to $148.50 per month from $144.60 in 2020.1 Part A premiums are also higher in 2021, although most Medicare recipients don’t pay for Part A through either their own or a spouse’s work history. Generally, if you have enough work history to receive Social Security benefits, you won’t pay Part A premiums.[3]
The Medicare Part A deductible increased by $72 in 2021, from $1,408 per benefit period to $1,484.[4]
The 2021 Medicare Part B deductible increased $5 in 2021, from $198 to $203.[5]
The 2021 Medicare Advantage (Part C plans, or private alternatives to Original Medicare) have increased the maximum out-of-pocket (OOP) limit from $6,700 to $7,550.[6]
Some of these increases were lower than they could have been; the 2020 spending bill limited the increase in Part B premiums to 25 percent of what they otherwise would be.2 But other increases, particularly the $850 increase in the maximum OOP for Medicare Advantage plans, have the potential to reshape a retiree’s budget.
Changes to the Former Part D “Donut Hole”
The Affordable Care Act (ACA) slowly eliminated the Medicare Part D (prescription drug coverage) “donut hole” in 2019. Prior to 2010, this donut hole meant that someone with high prescription costs would spend their full deductible, then pay 25 percent of prescription costs until they reached the donut hole—a complete gap in coverage where the claimant is liable for 100 percent of the costs until they reach their catastrophic coverage limit (usually thousands of dollars above the bottom of the donut hole).[7]
Beginning in 2019, this donut hole was completely closed.[8] Now, Part D recipients will meet their deductible, then pay 25 percent of prescription drug costs until reaching the catastrophic coverage limit.[9] And in 2021, the Part D plan’s maximum deductible will increase to $445, while the catastrophic coverage threshold will increase to $6,550. This means that Part D recipients will pay 25 percent of their prescription drug costs above $445 and below $6,550 (or a total of $1,526.25 plus the $445 deductible for those who hit the catastrophic coverage limit).[10]
Because Medicare is such a complex program and selecting the wrong plan (or the wrong plan for you) can cost you thousands of dollars, it’s a good idea to discuss your Medicare options with your financial professional before open enrollment.
Important Disclosures:
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
1 https://www.medicare.gov/Pubs/pdf/10050-Medicare-and-You.pdf
2 https://www.cnbc.com/2020/09/29/congress-may-limit-medicare-part-b-premium-increase-for-2021-.html
[1] https://www.medicare.gov/sign-up-change-plans/how-do-i-get-parts-a-b/part-a-part-b-sign-up-periods
[2] https://www.medicare.gov/what-medicare-covers/your-medicare-coverage-choices/how-original-medicare-works
[3] https://www.ssa.gov/benefits/medicare/
[4] https://www.cnbc.com/2020/12/25/some-medicare-costs-will-be-higher-in-2021-heres-how-to-cut-them.html#:~:text=The%202021%20Part%20B%20deductible,or%20partially%20cover%20that%20coinsurance.
[5] https://www.cnbc.com/2020/12/25/some-medicare-costs-will-be-higher-in-2021-heres-how-to-cut-them.html#:~:text=The%202021%20Part%20B%20deductible,or%20partially%20cover%20that%20coinsurance.
[6] https://www.kiplinger.com/retirement/medicare/601606/what-youll-pay-for-medicare-in-2021
[7] https://www.nytimes.com/2020/01/17/health/medicare-drug-costs.html
[8] https://www.nytimes.com/2020/01/17/health/medicare-drug-costs.html
[9] https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/costs-in-the-coverage-gap
[10] https://www.medicareinteractive.org/get-answers/medicare-prescription-drug-coverage-part-d/medicare-part-d-costs/phases-of-part-d-coverage
Sources
https://www.medicare.gov/sign-up-change-plans/how-do-i-get-parts-a-b/part-a-part-b-sign-up-periods
https://www.medicare.gov/what-medicare-covers/your-medicare-coverage-choices/how-original-medicare-works
https://www.ssa.gov/benefits/medicare/
https://www.cnbc.com/2020/12/25/some-medicare-costs-will-be-higher-in-2021-heres-how-to-cut-them.html#:~:text=The%202021%20Part%20B%20deductible,or%20partially%20cover%20that%20coinsurance.
https://www.kiplinger.com/retirement/medicare/601606/what-youll-pay-for-medicare-in-2021
https://www.nytimes.com/2020/01/17/health/medicare-drug-costs.html
https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/costs-in-the-coverage-gap
https://www.medicareinteractive.org/get-answers/medicare-prescription-drug-coverage-part-d/medicare-part-d-costs/phases-of-part-d-coverage
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