Medicare costs change every year. Keeping up to date on these changes will help you make a plan for your health care, and enable you to live the kind of retirement you planned on. 2023 costs rose along with overall inflation. Learn about the impact on 2023 Medicare costs for Part A, B, C & D, and Medicare Supplement insurance.
Most cost aspects of Medicare change each year; it’s how the system was designed. Specifically, these items change from year to year:
In this guide, we’ll look at the 2023 amounts for these items. Not every cost for Medicare changes each year, though.
For most people, how much they pay for Medicare Part A (hospital insurance) stays the same each year. That’s because most people pay for Part A through payroll tax deductions during their working career.
Part A is mostly pre-funded through FICA (payroll taxes). These tax amounts are set by congress. They’re not adjusted annually by the Centers for Medicare and Medicaid Services (CMS) like the other costs.
Currently, Medicare payroll taxes are set to 2.9% of your gross wages. If you earn more than $200,000 in a year, you’re subject to an additional 0.9% of your wages. If you work for an employer, they pay half of these taxes and you pay the other half. If you’re self-employed, you’re responsible for paying the whole amount.
You pay these taxes as long as you have taxable income (either wages or business income). Once you retire you generally stop paying these taxes.
By paying these taxes, you qualify to receive premium-free Part A; you don’t have to pay a separate premium when you start receiving Part A benefits at 65.
Every other cost for Part A changes each year.
Other than the payroll taxes, which stayed the same, all other Part A costs and charges increased in 2023. These increases affected:
For people who don’t qualify for premium-free Part A, the monthly premium increased to $499 or $274, depending on your work history.
The Part A deductible for 2023 increased to $1,556. This is the amount that you’re required to pay in advance, before Medicare starts helping pay costs. This is, unfortunately, not an annual deductible. Instead, you pay the Part A deductible for each new “Benefit Period” you need care for. This means that you can pay the Part A deductible more than once in a year.
When you pay the Part A deductible as part of a hospitalization or skilled nursing facility stay (the most common uses for Part A), you’re entitled to care for a fixed number of days without any additional payments:
If you need to stay longer, you’ll then have to pay a daily co-insurance amount:
If your stay lasts even longer, you’ll face these 2023 Medicare costs:
There are no lifetime reserve days for skilled nursing facility stays over 100 days.
For Part B, 2023 Medicare costs increased for these items:
The Part B premium increased to $171.10 for 2023. This is the base premium, which is what most people pay each month. You pay this amount in order to have coverage. You’ll pay additional amounts when you use your coverage. Some higher earning people may have to pay higher Part B premiums.
When you use Part B, there’s a deductible just like for Part A. For 2023, the Part B deductible is $233. You pay this amount up-front; only after you’ve met this amount will Medicare Part B help pay for your medical costs. When they do, you’ll end up paying 20% of the costs; Medicare picks up the rest. This 20% co-insurance did not increase in 2023.
It’s very important to understand that there is no spending cap with Part A and B. You’ll continue to pay your share of costs no matter how much you’ve spent during the year. This is one of the primary reasons that most people choose to use a private Medicare Insurance plan of some kind: to cap their out of pocket spending.
Part C of Medicare is the Medicare Advantage program. These plans are an alternative way to use your Medicare benefits. When you have a Medicare Advantage plan, you’re receiving your Part A and B benefits through a private insurance company. At doctor’s offices and other facilities, you’ll use your Medicare Advantage card. You pay co-payments that are set by the plan. The provider then bills your insurance company, rather than Medicare, for the rest of their fees.
To be enrolled in a Medicare Advantage plan, you have to be actively enrolled in Part B, so you’ll still be paying the monthly Part B premium, which increased to $171.10 for 2023. Beyond that, you can encounter these costs with a Medicare Advantage plan:
You may have to pay a monthly premium for your Medicare Advantage plan. While many plans are available with a $0 premium, this amount can change each year. If your plan has a deductible, this amount can change each year, too. Once again, many Part C plans do not have an annual deductible.
Every Medicare Advantage plan does have an annual cap on your spending, the OOPM. This is a key protection that limits how much you’ll pay out of pocket in any given year. CMS regulates this amount. For 2023, the Medicare Advantage limits on OOPM are:
These are the maximum allowed by law. Many Medicare Advantage plans have OOPM that are far lower than these limits.
Many Medicare Advantage plans come with Extra Benefits, which help with the cost of services not covered by Traditional Medicare. Any costs associated with these extras can change on a year by year basis. One of the biggest extra benefits is prescription drug coverage. Many Medicare Advantage plans come with Part D drug coverage built-in. We’ll discuss the 2023 Medicare costs for drug plans, including Medicare Advantage Prescription Drug Plans (MAPD) in the next section.
Part D of Medicare offers two ways to get help with the cost of prescription drugs:
The rules for both types of plan are exactly the same.
For Part D drug plans, you might have to pay the following costs:
Many Medicare Advantage plans offer drug coverage for $0 monthly premium, but all standalone drug plans will have a monthly premium. These premiums are set by the insurance company; they tend to increase each year. For 2023, the average monthly premium for standalone drug plans increased to $43.
Many Part D drug plans have an annual deductible. For 2023, the maximum permissible deductible increased to $480. This is an annual amount; you only pay it once per year.
Once you have met your 2023 drug deductible, your plan will start helping pay for your prescriptions. The amount you pay can change during the course of the year because costs are structured based on four Coverage Stages. You move through the Coverage Stages as the total amount both you and your plan pay add up during the year. The amounts for each Coverage Stage are set by CMS each year. For 2023, these amounts increased to:
During Coverage Stage 2, you’ll pay a relatively low copayment or coinsurance amount for each of your prescription fills. Your plan pays the rest on your behalf. When you hit Stage 3, the Coverage Gap, you’ll pay up to 25% for the cost of your medications for every fill until you reach Stage 4, Catastrophic Coverage. If you hit the Catastrophic coverage stage, you’ll pay a very small co-payment for each prescription you fill, or 5% of the retail cost, whichever is higher. There is no hard cap on your total yearly drug spending. You start each year in January at Coverage Stage 1.
Costs for Medicare Supplement, or Medigap, Insurance change each year, too. However, almost all of these costs are set by the individual insurance companies. These plans are technically supplemental insurance, which means that they are simply added-on to your Original Medicare coverage.
When you go to the doctor or have work done at a facility like a hospital, Original Medicare will pay the amounts that they’re required to. Your Medicare Supplement Insurance plan will then pay whatever amounts it is required to. How much your plan pays is determined by the specific plan you choose. There are ten standardized plans available, plus two high deductible options, and each one of them covers a different portion of your out of pocket costs.
For instance, most Medigap plans will pay your Part A deductible for you. So, if you go to the hospital, you might not have any out of pocket costs for your hospital stay.
The premiums for Medicare Supplement Insurance are based on several factors, but among the most important is the comprehensiveness of the plan. In other words, does your Medigap plan pay most or all of your out of pocket costs for you, or just a few? The more comprehensive, the more expensive your coverage will be in terms of monthly premium.
Medicare Supplement premiums are set each year, and they tend to go up. The way that these premiums are set impacts how much, and how fast, they rise. There are three main ways that insurance companies set Medigap premiums:
Issue age rated plans set their premiums based on your specific age at enrollment. This is a pretty rare option. Much more common is Attained age rating. This means that the insurance company takes into account your current age each year when setting premiums. Since our age increases each year, this means that your Medigap premium will rise along with your age.
Community rating works a little differently. With community rating, an insurance company sets one rate for an entire community. The community is usually a collection of zip codes in a county or state. Everyone pays the community rate, regardless of age. While age isn’t a factor in the community rate, many insurers are able to offer discounts off of the community rate, which can be based on age.
Regardless of which rating method your insurer uses, you should expect your monthly premiums to increase every year.
There are a couple of benefits associated with Medicare Supplement Insurance that are regulated and updated by CMS. These amounts are:
The premiums for these four Medigap plans continue to be set by the individual insurance companies.
As Medicare costs increase each year, you have the opportunity to make changes to your coverage. You can do this by changing plans during valid enrollment periods. Everyone in Medicare is allowed to change their coverage during the Annual Election Period (AEP). AEP begins on October 15 and ends on December 7. If you make a change to your coverage during AEP, your new plan will be effective on January 1 of the following year.
If you have a Medicare Advantage plan, you can make changes during AEP, but you also have one additional enrollment window. The Medicare Advantage Open Enrollment Period (MA-OEP) is from January 1 to March 31 of every year. If you change Medicare Advantage plans during MA-OEP, your new plan will be effective on the first day of the month following your application.
As Medicare costs change each year, be sure to take full advantage of your opportunities to change plans.
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