If you’re in Medicare or getting close to entering, you’ve probably heard about large premium increases. It’s true; Medicare Part B premiums for 2022 rose quite a bit, and there has been a lot of discussion and speculation about future changes. Some people believe that the Part B premium may even be reduced in the future. Whether they’re going up or down, premiums are an important part of your Medicare coverage. Read on to see what the premium changes for 2022 are, as well as an overview of other cost increases.
For 2022, the standard Part B premium increased to $170.10 per month, an increase of $21.60 per month. This was the largest dollar increase in the program’s history . Several factors contributed to the size of the increase. For one thing, the premium increase for 2021 was artificially limited by congressional action. The second factor affecting the 2022 Part B premium was the anticipation of Medicare coverage of a new and expensive Alzheimer’s medication. Besides these specific costs, the overall inflation of medical care continues to push premiums higher for all kinds of health insurance.
There are two reasons why you might be required to pay premiums that are higher than the standard:
In the first case, you’ll be responsible for a late enrollment penalty if your enrollment into Part B is late. Most people become eligible for Medicare when they turn 65. Other people qualify early due to illness or disability. When you’re eligible to enter Part B, you do have the option to delay your entry if you continue working and you’re covered by your employer plan, or your spouse’s employer plan. This is true only if the employer employs more than 20 people. If you meet this qualification, you can delay taking Part B until your employer coverage ends. When your coverage does end, you’ll have the opportunity to enroll in Part B without paying a penalty.
For all other cases, your enrollment will be considered late if you enroll after your initial enrollment deadline. For every full 12 months that your enrollment is late, you’ll pay a 10% late enrollment penalty. The 10% is calculated based on the standard Part B premium. If your enrollment is late by 24 months, your penalty is 20% of the base premium. You’ll pay the late enrollment penalty for as long as you have Part B coverage in most cases.
The other reason you might pay more than the base Part B premium is if your income exceeds certain thresholds. People with income over the thresholds are required to pay Income Related Monthly Adjustment Amounts (IRMAA). IRMAA is assessed based on your federal income tax filing status of Single, Married Filing Jointly, or Married Filing Separately. For 2022, the income threshold is $91,000 for Single and Married Filing Separately taxpayers. For Married Filing Jointly, the first income threshold starts at $182,000.
The income used to determine this is known as Modified Adjusted Gross Income (MAGI). MAGI is equal to Adjusted Gross Income (AGI) plus tax-exempt interest income. Your IRMAA is calculated based on your tax return two years before. If you are subject to IRMAA but your income changes due to a major change in your life circumstances (like your retirement), you can appeal your extra Part B premiums to the Social Security Administration using Form SSA-44.
Besides the Part B premium, there are other costs that you’ll have to pay when you use your benefits. These costs include:
The deductible for 2022 is $233. This is the amount that you’re expected to pay out of pocket directly to your providers. Once you’ve paid this amount, Medicare Part B will start helping with the cost of your Part B-covered services. Part B will pay the first 80% of the cost for your care. You’re responsible for the remaining 20%.
In some cases, you might also have to pay Part B excess charges. These charges are only applicable when you receive care from a provider who doesn’t accept Medicare’s standard prices. Most providers do take Medicare’s standard pricing. But, those that don’t are allowed to bill you an additional 15% of the Medicare base price. In this case, the billing would work like this:
You would pay a total of 35% of the Medicare base price. The base price is an amount that Medicare has calculated, in advance, for every Medicare-covered service and procedure.
Excess charges are quite rare since most providers accept Medicare’s base pricing.
Medicare Part A is the other half of the Medicare program. While Part B covers outpatient medical services like doctor’s appointments and durable medical equipment, Part A provides hospital insurance benefits. Part A covers you for these kinds of services:
The 2022 costs for Part A increased, too, but they work slightly differently than Part B.
You probably pay for your Part A coverage during your working life through payroll taxes. You’ve had a small Medicare tax withheld from every one of your paychecks. Besides this amount, your employers have also paid a Medicare tax on your behalf. If you are or were self-employed, you’ve been responsible for paying these taxes on your own.
If you work long enough, and pay enough Medicare payroll tax, you’ll be eligible to receive Part A benefits without having to pay a monthly premium. This is called premium-free Part A, and you generally have to work full-time for at least 10 years to qualify for it. Most people do. For those that don’t you might be able to qualify through your spouse if your spouse qualifies for premium-free Part A.
If you don’t qualify for premium-free Part A, you can elect to sign up for it anyway and pay a monthly premium for your coverage. The premium amounts increased for 2022; the premium is broken into two bands, depending on how much work history you have:
When you opt to pay for Part A coverage, you’ll have to also sign up for Part B; you’ll pay the standard Part B premium in this case, unless you’re subject to IRMAA maximums. There are no IRMAA amounts for Part A coverage.
When you opt to pay for Part A coverage, you’ll have to also sign up for Part B; you’ll pay the standard Part B premium in this case, unless you’re subject to IRMAA maximums. There are no IRMAA amounts for Part A coverage.
There are two other kinds of costs you’ll be exposed to for Part A, and both of them increased for 2022:
All coverage under Part A will begin with the Part A deductible. The deductible increased for 2022 to $1,556. You’ll have to pay this amount out of pocket before Medicare will help you pay for any Part A services. Unlike the Part B deductible, the Part A version isn’t an annual deductible. It’s actually possible to pay the Part A deductible more than once during a year. Though this is a rare occurrence, it can happen if you need Part A services like hospitalization multiple times in a year in episodes separated by more than 60 days.
Once you’ve paid the Part A deductible, you may be exposed to additional out of pocket costs. The most common costs relate to hospital and skilled nursing home stays. Once you’ve paid the deductible, Part A covers you for a fixed number of days in either a hospital or skilled nursing facility. Once you exceed these stays, you’ll pay a daily co-insurance amount:
If you need more time in a skilled nursing facility, you’ll be responsible for the full cost from all days beyond 100.
If your hospital stay lasts more than 90 days, you’ll pay $778 per day for each day beyond 90 days for as long as you have Lifetime Reserve Days available. Every Medicare Beneficiary has 60 Lifetime Reserve Days; you only use a lifetime reserve day when you’re hospitalized for more than 90 consecutive days, so it’s very rare to use them up. If you do use up all of your reserve days, and you stay in the hospital longer than 90 straight days, you’ll have to pay the full cash price after your reserve days run out.
Besides Medicare Part B premiums 2022 and Part A and B cost-sharing amounts, there are other gaps that you’ll need to be prepared for. The term “gaps” refers to any amounts that you’re expected to pay, or coverages and benefits that aren’t included in your Original Medicare coverage.
Other than the out of pocket costs, the major gaps in Parts A and B are:
Of these, the most uncomfortable to people is the lack of prescription drug coverage and any kind of spending cap. Unlike with most other kinds of health insurance, your costs are potentially unlimited under Parts A and B. Since daily hospital costs can be very high for long hospitalizations, and cancer treatments like chemotherapy are covered by Part B, your costs can be extremely high if you face serious illness under Original Medicare. To address some of these concerns, there are three private Medicare Insurance options available for you to choose from.
Part C of Medicare was created in 1996 as a way for people to choose to get their Part A and B benefits from a private insurance company. As such, Medicare Advantage plans actually work as a separate plan from Original Medicare. When you have Medicare Advantage coverage, Medicare (the government program) is not involved in paying for your care. So, when you see a doctor, you’ll give them your Medicare Advantage plan card rather than your Original Medicare card. The provider bills your plan, not Medicare.
One of the major benefits of Medicare Advantage plans is that they come with an annual Out of Pocket Maximum (OOPM) amount. This amount is the most you’ll pay for medical care in any year (it doesn’t include the cost of prescription drugs, though). This limit is important because it can protect you from runaway medical costs in a way that’s not available from Part A and B.
Many Medicare Advantage plans also cover prescription drugs. These plans are called Medicare Advantage Prescription Drug Plans, or MAPD for short. Getting prescription drug coverage from a Medicare Advantage plan can save you money compared to other prescription drug options.
The other reason people are attracted to Medicare Advantage plans is the availability of Extra Benefits, which are benefits beyond what Original Medicare provides. Some of the most popular Extra Benefits are routine vision and hearing coverage, both of which are unavailable with Original Medicare.
Your other option for prescription drug coverage is a standalone Prescription Drug Plan under Part D. If you don’t want a Medicare Advantage plan, you’ll need to enroll in a standalone drug plan. Standalone drug plans come with out of pocket costs, just like the rest of Medicare, and you can expect to pay:
Once you meet your deductible, if your plan has one, you’ll pay a co-payment for each prescription you fill. The amount you pay can vary based on the Tier of the medication (brand name medications are usually higher Tier) as well as how much you and your plan have spent on medications during the year. As you exceed certain thresholds, your share of the cost for your medications increases. There is no annual cap on your prescription drug spending.
Medicare Supplement Insurance is a kind of coverage available from private insurance companies that combines with your coverage under Original Medicare parts A and B. These kinds of plans are very often called Medigap plans because they are designed to help you cover some of the gaps in Parts A and B of Medicare.
Medigap policies are sold in standardized “Plans” which are known by letter: A, B, C, D, F, G, K, L, M, and N. Each of the standardized plans covers a slightly different number of gaps in Medicare. Since there are so many options available, you can decide how much coverage you need, and then find a Medigap plan that will provide it.
Since Medigap and Original Medicare work together, you’ll give your provider both your Medigap card and your Original Medicare card. Your provider will bill both; Medicare pays first, and then your Medigap plan will pay as a secondary coverage.
Medicare Supplement plans don’t cover prescription drugs, so you’ll have to enroll in a standalone Part D drug plan if you want Medigap coverage.
By understanding the various costs you’ll face in Medicare, you can make an assessment of your needs and choose the private plan or plans that will best fit your budget and health status
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