2021 Medicare Premiums to Rise by 2.7%
If the Social Security 1.3% cost-of-living adjustment was a disappointment, the Medicare Part B premium increase of 2.7% was a relief. Twisted logic though this is—clearly, the rise in Medicare premiums are outstripping Social Security’s ability to keep up with it—it could have been worse. In their 2020 report, Medicare trustees projected an increase of 6%. So we’ll take the 2.7%.
The Part B premium for 2021 will be $148.50, up $3.90 from the 2020 premium of $144.60. The income-related monthly adjustment amount (IRMAA) for Part B and Part D will be going up by a few dollars for all the tiers. Inflation adjustments raised the income tiers only slightly: the IRMAA now starts at $88,000 for single individuals (up from $87,000 in 2020) and $176,000 for couples (up from $174,000).
Medicare Advantage premiums actually went down, thanks to expanding profits even during the pandemic. The average Medicare Advantage plan with prescription drug coverage (MA-PD) has a premium of $21 in 2021, which is 11% lower than in 2020. But there are many zero-premium plans to choose from. More than half of all MA-PD enrollees pay no premium other than their Part B premium. The $21 average includes those zero-premium plans, so the average among plans charging a premium would be higher. Most MA-PD plans offer extra benefits, primarily fitness (96%), dental (92%), and eye exams and glasses (91%). Although plans are now allowed to offer non-medical benefits such as meals, transportation, and in-home support, few do.
The average drug plan premium will be going up by 8%, to $41 from $38. The range of premiums remains broad, from $7 to $89. If an individual does not take drugs on a regular basis, they should take advantage of these low-premium plans; there’s no reason not to go with the cheapest plan as new insurers enter the market and price their plans competitively. For individuals who do take drugs, use the Medicare Plan Finder and enter drugs and dosages—a good homework assignment—to find the plan with the lowest overall drug costs.
The Part D deductible is going up by $10, to $445 from $435. Most drug plans (67%) charge the standard deductible. Some charge a partial deductible and others have no deductible. The average monthly premium in 2021 for PDPs that charge no deductible is $88, nearly three times the monthly premium for PDPs that charge the standard deductible ($34) or a partial deductible ($31). Copayments range from $0 for preferred generics to $47 for preferred brands and up to 50% of the total cost of non-preferred drugs. When it comes to managing costs, choosing the right drug plan based on the drugs you take is crucial. It’s also important to work with doctors to find the most effective drugs with the lowest out-of-pocket costs.
The Part A deductible will be going up in 2021, to $1,484 per day for the first 60 days of hospitalization. This is 5% higher than the $1,408 deductible in 2020 and is one of the main reasons people in traditional Medicare buy a Medigap policy. All Medigap policies cover the Part A deductible. Medigap premiums vary widely depending on where you live and which policy you choose. For example, in Des Moines, Iowa, premiums for Plan G range from $97 to $363. In San Francisco premiums for the same policy range from $115 to $248. Use the Medicare Plan Finder to see a list of Medigap plans for an individual’s zip code, then call the plans for information and enrollment. Individuals who already have a Medigap policy will soon be getting their new premium notices for next year.
To discuss this content further or to ask any financial-life question you may have, we encourage you to reach out to us at 724.942.2639 or schedule a FREE/no-obligation time to chat with an advisor at your convenience.
Please don't forget to share, and as always... know that BBA is here to help!
We appreciate our relationship with you and look forward to delivering this value!
If you're new to BBA, we welcome you aboard and look forward to getting to know you!