Medicare adjusts premiums and deductibles every year, and the impact on people’s budgets is sometimes large. Do you know what the Medicare Part B deductible for 2023 is? Find out in this guide, as we discuss some of the common costs of Medicare and review your options to combat high medical costs in retirement.
Deductibles are common throughout the insurance industry, and you probably have at least two other kinds of insurance that feature deductibles. A deductible is an amount that you, the person insured by a policy, must pay before an insurance company will pay benefits. Common insurance coverages with deductibles include homeowners insurance and auto insurance. Deductibles are also very common for health insurance coverage, especially for individual policies.
By providing for a deductible, an insurance company is making sure that you, the policyholder, have some “skin in the game.” Without a deductible, people are much more likely to file claims, some of which might actually be frivolous and wasteful.
Deductibles, then, are designed to ensure that an insurance company doesn’t pay claims that are wasteful. They also curb the frequency of claims submitted.
Medicare is an insurance program, and it uses many of the same actuarial calculations as other types of insurance. Medicare calculates the Part B, and Part A, deductibles to ensure that people don’t over-consume health care services.
The Part B deductible is an annual deductible. For 2023, this amount is set at $233 . When you use your Medicare Part B benefits, you’ll pay the first $233 out of pocket. Generally this means that you’ll pay the full price of services and procedures directly to your provider, at least until you’ve spent $233 . Once you’ve satisfied the deductible, Medicare will begin to pay benefits.
The Part B deductible is a true annual deductible; you only pay it once per year. The Part A deductible doesn’t work like that. With Part A, you pay the deductible every time you start a new Benefit Period. A Benefit Period is a span of time during which you receive care for a Part A-covered service, plus 60 days. For example, let’s assume you’re hospitalized in May and receive care related to that hospital stay throughout the month; your last day of care is May 31st. 60 days get added to May 31st, which means that your next benefit period can’t begin until August 1st. If you need Part A services after August 1st, you’ll have to pay the Part A deductible again.
So far we’ve looked at the annual deductible for Part B. There are other costs to be aware of, though.
Besides the deductible, you can expect to pay these costs relating to Part B:
You will begin paying a monthly premium for Part B coverage when you actually enter the program. For most people, this will happen at age 65. Some people will enter later, if they're still working, or earlier, if they have certain illnesses or disabilities.
The standard Part B premium for 2023 is $170.10. You’ll pay the standard premium every month for as long as you have Part B coverage. The premium goes up each year. The premium and the annual deductible go hand in hand: both amounts are designed to help mitigate the overuse of health care, and help keep the Medicare program on a healthy financial footing.
The Medicare Part B premium is adjusted for income for high earners. Each year, Social Security (the government agency responsible for collecting Medicare premiums) looks at your tax return from two years before to see if you’re subject to the higher Part B premium.
Besides the monthly premium for your coverage and the annual deductible, you’ll be responsible for paying part of the cost for your care. This is known as “cost-sharing” and it comes in the form of a fixed 20% co-insurance charge. Medicare will pay the first 80% of the cost for your Part B services and procedures (once you’ve paid the deductible). You pay the remaining 20%.
In addition to this, you’re also potentially responsible for Medicare Part B Excess Charges. These charges are amounts that some medical providers are allowed to add to your standard 20% co-insurance because they don’t accept Medicare’s prices. Most providers do accept Medicare’s prices, so these charges are somewhat rare, but they can be as much as 15% of the Medicare-approved prices.
Of course, Part B is only half of the story, so we’ll next take a quick glance at the costs you’ll pay for Part A. This will then allow us to look at the private Medicare Insurance options available to you to help keep your costs low.
For Part A, there are also costs both for coverage and for services. Unlike with Part B, though, most people don’t pay a monthly premium for Part A. Instead, you pay for this coverage during your working years through payroll taxes. If you work long enough (generally ten years of full-time work), you’ll be able to claim Part A without paying a monthly premium.
If for some reason you don’t qualify for premium-free Part A, you have the right to sign up anyway and pay a monthly premium.
When you actually use your Part A benefits, you’ll have to pay a share of the cost. These costs come mainly in two forms for the most common Part A services:
For 2023, the Part A deductible is $1,556 . This amount also increases each year. Once you’ve paid the Part A deductible, you’re covered for fairly long term hospital or skilled nursing home stays. You’ll have to pay a daily co-payment if your stay exceeds:
We mentioned before that the Part A deductible works differently than the Part B deductible; although rare, it is possible to pay the Part A deductible more than once in a year. This fact brings us to the most important thing you need to know about your out of pocket spending under Medicare: there is no annual cap on how much you can spend. This is a major deficiency in Original Medicare, and perhaps the primary reason that most people elect to enroll in a private Medicare Insurance plan to work with their Medicare benefits.
The Medicare Part B deductible is only one of the costs that private Medicare Insurance plans are designed to help you pay for. All private plan options aim to close at least one of the “gaps” in Original Medicare. In this context, you can think of the gaps as:
The three main private plans are:
Each of these private plans solve some of the difficulties of Original Medicare in a different way, and some of them can be combined to give you extremely comprehensive coverage. The eligibility and entry rules are slightly different for each of the private plans, so we’ll look at them in turn.
Medicare Supplement Insurance is also referred to as Medigap because this product is designed to close many of the gaps in Parts A and B. Medigap is a supplemental, or secondary, coverage because it will only pay claims after a primary insurance coverage has paid. In this case, Parts A and B are the primary coverage.
When you see a provider, you’ll give them both your Original Medicare card and your Medicare Supplement plan card. Your provider will bill both of your coverages. After Medicare pays the amounts they’re supposed to, your Medigap plan will pay whatever amount they’re contracted to. You might have an amount to pay, too, depending on which specific Medigap plan you choose.
Medicare Supplement Insurance plans are standardized through 47 of the U.S. states. Wisconsin, Minnesota, and Massachusetts have their own unique Medigap rules. In the 47 standardized states, there are ten coverage levels available. Each of the coverages is known by letter; Plans: A, B, C, D, F, G, K, L, M, and N. There are also two high deductible Medigap plans available.
Each of the standardized plans cover a different mix of the deductibles and co-insurance that you’re exposed to under Original Medicare. You can select the one that best fits your needs and your budget, since more comprehensive Medigap plans have higher premium costs.
To sign up for Medicare Supplement Insurance, you must be enrolled in both Parts A and B of Original Medicare. In some states, you might have to be at least 65 years old, although some states require insurance companies to accept people younger than 65.
Since Medigap plans don't cover prescription drugs, you’ll need to enroll in a separate, standalone Part D drug plan in order to get help paying for your medications.
Medicare Advantage Plans, which are authorized under Part C of Original Medicare, are a completely different kind of coverage than Medigap. Under Medicare Advantage, you actually receive all of your Part A and B benefits through your private insurance plan. In this case, when you go to the doctor or other provider, you’ll only present your Medicare Advantage plan card. Your provider will collect your co-payment directly from you; they will then bill your plan for the remainder of their fees. Medicare is not involved in any of this billing.
For the most part, when you use your plan benefits, you’ll pay small co-payments. However, one key feature of Part C plans is that they all have an annual Out of Pocket Maximum (OOPM) feature. The OOPM is a spending cap on medical benefits. You can’t spend more than the OOPM in any one year on medical coverage. This feature solves the problem of unlimited out of pocket spending under Original Medicare.
Another advancement of Medicare Advantage over Original Medicare is that many Medicare Advantage plans come with prescription drug coverage. A Medicare Advantage plan that includes drug coverage is known as an MAPD plan (Medicare Advantage Prescription Drug Plan). The drug benefit offered by MAPD meets the requirements under Part D.
To be eligible for Medicare Advantage coverage, you must be enrolled in Parts A and B. However, there is no minimum age, so if you enter Medicare early, you can enroll in a Medicare Advantage plan at the same time.
Even though Medicare Advantage plans are an alternative to Original Medicare, you have to keep paying your Part B premium each month to stay enrolled in your plan.
Besides MAPD plans, Part D authorized standalone Prescription Drug Plans as a way to get help with the cost of medications. A standalone plan only covers prescription drugs; there’s no medical coverage provided (unlike MAPD plans, which provide both).
Just like with the other aspects of Medicare, Prescription Drug Plans come with a variety of costs that you’ll be expected to pay. These include:
Every Part D drug plan has a list of the medications it covers; this list is called the plan Formulary. Every plan has its own Formulary, which means that not all plans cover all available medications. This makes it very important to check the formulary before enrolling in a drug plan; you want to make sure your plan will cover the medications you take. Otherwise, you won’t get any help paying for your medicines; you’ll pay full cash price.
You can enroll in both a Medigap plan and a standalone drug plan, but you usually can’t be enrolled in both a Medicare Advantage plan and a standalone drug plan at the same time (with very rare exceptions).
You are eligible to enroll in a standalone Part D drug plan if you are enrolled in either Part A or B. There is no requirement to be enrolled in both. There is also no age requirement; you can get Part D drug coverage as soon as you’re eligible for Medicare, even if that’s before you turn 65.
No matter which private plan you choose to help cover the Medicare Part B deductible for 2023, you’ll want to review your coverage each year as Medicare updates the premium and deductible amounts. You’ll have the opportunity to make changes to your coverage during the Annual Election Period (AEP) every October 15th to December 7th.
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