Medicare is a federally funded health insurance program designed for people who are 65 years old and older. It also covers individuals younger than 65 who have qualifying illnesses and disabilities. More than 50 million people in America are on Medicare, including 90 percent of all residents over 50 years old.1
Medicare is a vital service because it provides health care coverage for individuals who might not otherwise be able to obtain it. However, its coverage premiums are not the same across the board. Not only can they vary from year to year but also from person to person within any given year. To help you gain a better understanding of Medicare and its specific benefits and costs, here are some Medicare coverage changes that you should know.
Changes in Income
If you experience a change in income, you may also find that your Medicare premiums change. If you are fortunate enough to see your income increase substantially, you should expect a corresponding increase in the amount you pay for your Medicare coverage. Technically, the premium change is known as the “income-related monthly adjustment amount.”
For most people, the federal government pays about 75 percent of the Part B premium, and the beneficiary pays the other 25 percent. If you are in a higher-income bracket, though, you will be required to pay more than 25 percent. Depending on your income level, you could pay as much as 80 percent. The amount you will pay for your optional Part D prescription drug coverage gets more complicated. Without delving into the details, suffice it to say that you will pay a higher premium.
On the other hand, if your income goes down due to such things as a divorce or job change, your premiums may be reduced. With certain exceptions, the change in premiums generally occurs when your modified adjusted gross income (MAGI) exceeds or drops below $170,000 if you are married and $85,000 if you are single.
Changes in Prescription Drug Cost
Medicare Part D, which is optional, provides prescription drug coverage through an insurance company or other approved organization. These plans can stand alone if you choose original Part A and Part B Medicare, or they can be combined into a single plan. Various options include Medicare Private Fee-for-Service (PFFS) plans, Medicare Medical Savings Account (MSA) plans, and Medicare Cost plans.
When you choose a plan, you also choose the prescription drug coverage you desire. Different plans have different premiums. The amount you pay depends on the plan you choose. If the cost of the prescription drugs you are presently taking should change significantly, or if your doctor should prescribe new drugs, you may find that the plan you previously selected is no longer the best one for you. This is an important consideration because, if you need to change plans, you may only be able to do so during the open enrollment period.
Although it seems counterintuitive that your Medicare premiums would ever go down, there are at least three circumstances in which that might happen:
1. You select a Medicare Advantage plan over a Medigap plan
Medicare Advantage plans are generally less expensive than Medigap plans. This is because the Medicare Advantage plan co-pays and deductibles are usually higher. However, you will need to estimate your overall cost in order to determine which plan is best for you.
2. You find a provider with a lower cost
Medicare Advantage plans and Medigap plans are provided by private insurance companies. Even when the coverage amounts are exactly the same, the premiums could be significantly different. If you take the time to compare rates, you may be able to lower your premiums.
3. You combine two or more plans
It might be possible to lower your premiums by combining two or more plans. One possibility would be to use a Medical Savings Account (MSA) to pay health care costs until the deductible is met in another plan, such as a high-deductible Medicare Advantage plan. Just be aware that MSA plans do not cover prescription drugs, so you will need to purchase a separate Part D plan if you want that coverage.
Premium Changes Made by Medicare
From time to time, Medicare initiates a change in premiums. This typically occurs due to a change in the cost of living. Medicare recently announced that it will increase the standard monthly premium for Medicare Part B from $134.00 to $135.50 for 2019. That increase is tied to a Social Security Administration (SSA) cost-of-living adjustment (COLA) of 2.8 percent.
However, about two million Medicare beneficiaries will not be required to pay the new premium amount due to a hold harmless provision in the laws that govern such transactions. The federal government collects the Medicare Part B premium by deducting it from a person’s Social Security (SS) payment. However, the hold harmless provision prohibits the SSA from reducing SS payments. This means that Medicare premium increases are limited to the SS COLA adjustments.
Increases in Deductibles
In addition to increasing the 2019 premiums for Medicare Part D, Medicare also plans to increase the deductible from $183 to $185. While an increase in the deductible amount is not exactly the same as a premium increase, it has the same effect, which is to reduce the amount of money that you have in your pocket.
You may have supplemental coverage that pays your Part B deductible. This could include Medigap plans C and F, employer-sponsored plans, or Medicaid. You may also have a Medicare Advantage Plan. While the co-pays and deductibles for such plans are often low, they don’t necessarily correspond directly with changes in deductible amounts made my Medicare. Therefore, you will need to check your own plan to see what the deductibles are for the upcoming year.