We’re nearing the end of the year, and many of our clients are putting their finances together for 2022. On November 12, the Centers for Medicare and Medicaid Services (CMS) announced the biggest increase in Part B premiums that the Medicare program has ever witnessed. These increased premiums have left some beneficiaries wondering about any other changes in 2022.
This article should answer some of those questions.
Increases in Medicare Part B
Let’s talk about the increase that has most people talking right now – the Part B premium. The increase in 2022 is 14.5%. As we said, this is the biggest hike in rates since the program began. That percentage translates into an increase of $21.60 for the standard premium, bringing it to $170.10.
Your premium could be more if you are a high-income earner. CMS looks at your Modified Adjusted Gross Income (MAGI) from two years prior to determine if an additional amount should be added to your Part B premium. This adjustment is called an Income-Related Monthly Adjustment Amount, or IRMAA.
A less-talked-about increase in Medicare Part B is the Part B annual deductible. The deductible is increasing to $233 in 2022, which is an increase of only $30.
Changes in the Other Parts of Medicare
Most Medicare beneficiaries receive premium-free Part A. If they do, that’s not changing. As long as you’ve paid Medicare taxes for forty quarters, you’ll get Part A for $0 each month. If you’ve not met the tax requirement, however, you’ll pay a monthly premium.
If you paid Medicare taxes for 30 quarters, but less than 40 quarters, your premium is increasing to $274 per month. If you paid taxes for less than 30 quarters, you would pay the full premium, which is increasing to $499 per month.
The Part A deductible works differently than the Part B deductible. It applies to every benefit period, not every calendar year. A benefit period begins when you are admitted as an inpatient to a hospital and ends after you have been out of the hospital for 60 consecutive days. The Part A deductible in 2022 is $1556.
If you are enrolled in a Part C plan, also known as a Medicare Advantage plan, your premium will depend on your insurance carrier. You should have received an Annual Notice of Change (ANOC) from your current Part C carrier. This document will have all the information about how your plan is changing in 2022, including any increase in premium or deductible.
Similar to the Part C plans, Part D plans are offered by private insurance carriers, so any increase in premium will depend on your specific plan. However, there are some things that all Part D plans have in common: the deductible and the catastrophic coverage phase.
Part D carriers can choose their own deductible, up to the maximum of $480, which is what most plans choose to employ. Each plan also has four levels of coverage: the deductible phase, initial coverage phase, coverage gap (also called the donut hole), and then the catastrophic coverage phase.
When you are in the catastrophic coverage phase, nearly all of your Part D prescription drug expenses will be covered by your plan. To enter into that phase, you’ll need to spend $7050 out-of-pocket in 2022. (In 2021, the threshold was $6550.)
Factors Contributing to Increased Rates
After the big announcement by CMS, they cited three reasons for the increased premiums.
First, we all know that prices are increasing across the board, and that includes the price of healthcare. COVID-19 added to the increased prices. Since the older population generally has higher medical expenses, the program saw a larger increase in premiums.
Second, increases in premiums for 2021, during the height of the pandemic, were kept to a minimum. We saw a $3 increase in the Part B premium in 2021. However, Congress requires CMS to pay back those reduced fees. The payback begins with the 2022 premiums.
Lastly, the Medicare program is increasing premiums to prepare for the possible acceptance of a new Alzheimer’s drug – Aduhelm. The drug recently got approved by the Food and Drug Administration (FDA). However, it has not been approved for coverage by Medicare, nor do the increased premiums mean that it will eventually be accepted. However, the program is taking a proactive approach because if it is approved, the expected price for Aduhelm is $56,000 per year. That price is for one individual only.
Social Security Benefit Increase
The silver lining in all this inflation is that Social Security benefits are also increasing. Each year, the program determines if an increase is needed due to inflation. This is called the COLA, the Cost-of-Living Adjustment. The Social Security Administration uses a federal index of consumer goods and services to determine if a COLA is warranted. For 2022, they calculated a 5.9% increase in benefits. This amounts to approximately $71 for most beneficiaries.
Now is a great time to check in with your licensed agent to see if there are any cost-saving options available to you for the new year. While we cannot change any of the premiums or deductibles in Parts A or B, we can look at any other coverage you have to make sure you are still getting the best rates. Give us a call today to schedule a consultation.