Did you know that Medicare premiums change each year? Premiums are impacted by a variety of factors, including inflation and Social Security Cost Of Living Adjustments. Other Medicare costs change each year, too, and these changes can impact your coverage choices. Read on to see Medicare premiums for 2023 Part A & B costs explained.

Medicare Premiums For 2023 - What Changed?

Premium change announcements are always nervously anticipated. Since millions of Medicare Beneficiaries are dependent on fixed incomes, increases in Medicare premiums can be painful. 2023 proved to be particularly painful. The Part B premium increased to $170.10 , which represented a historically large jump.

The Part B premium is only paid when you enter the program, generally at or near retirement. In this way, it’s like a traditional health insurance policy: you only pay premiums when you put the coverage into effect.

Part A, the hospital insurance aspect of Original Medicare, works much differently. Most Americans don’t pay a premium for this coverage. Instead, they prepay for Medicare Part A through payroll tax deductions during their working years. If you look at your paystubs, you will notice that besides federal and state income taxes, part of your paychecks are withheld to pay for Medicare. These monies are used to fund your Part A coverage.

If you work long enough, you’ll receive “premium-free Part A” which means that you can get the coverage without paying a monthly premium. You’ll likely qualify for premium-free Part A if you qualify to receive Social Security retirement income. Usually, it takes at least ten years of full-time work to do this.

If you never worked, or didn’t work enough to qualify for premium-free coverage on your own, you can qualify through a spouse who met or meets the requirements.

Lastly, anyone who doesn't qualify on their own work history or through a spouse has the right to choose to pay a monthly premium. For these people, the premium for 2023 also increased:

• $499 per month
• $274 per month

The amount you pay depends on your actual work history. If you have enough, you’ll qualify for the lower premium.

These amounts, the Part A and Part B premiums, represent what you’ll pay just for having Medicare coverage. You’ll also face costs when you use your benefits to receive care, and some of those costs increased for 2023, too.

Part A & B - Costs For Services

Once you’re in the Medicare program and start using your benefits, you’ll experience out of pocket costs for most services and procedures you use. The way these costs are structured is different for Parts A and B.

Costs For Services Under Medicare Part A

Since Part A covers you primarily in institutional settings, you’re unlikely to use this coverage very often. When you do, it’s usually for a major health problem. When you need this kind of coverage, like when you have to stay in the hospital, you’ll have to pay the Part A deductible. The deductible increased to $1,556 for 2023 . Whenever you’re in need of Part A services, you’ll be responsible for paying this deductible before you get any help from Medicare.

You might be required to pay the Part A deductible more than once during the year in certain circumstances. While this is pretty rare, it could happen if you have multiple hospitalizations or skilled nursing home visits during one year, but the stays are separated by more than 60 days. In this case, you pay the deductible once per Benefit Period.

Once you’ve met the deductible, Part A provides very good coverage. For instance, just by paying the deductible, you’ll be able to stay:

• 60 days in the hospital
• 20 days in a skilled nursing facility

You won’t have to pay any daily amounts for these stays; it’s covered by your Part A deductible. As a side note, while Part A covers your hospital stay, you’re likely to receive Part B covered services, like doctor’s consultation or surgeries, during your stay. In that case, you’ll use your Part B benefits. Part A covers the costs of being in the hospital, and Part B will help with the costs of being treated during your stay.

If your health requires you to be in the hospital or skilled nursing facility longer than the Part A deductible pays for, you’ll begin to pay a daily co-payment:

• $389 per day for hospital stay days 61 to 90
• $194.50 per day for skilled nursing facility stay days 21 to 100

Part A will only cover you for 100 days in a skilled nursing facility in any one Benefit Period. For stays longer than 100 days, you’ll pay the full price.

If your hospital stay exceeds 90 days, you’ll pay a daily co-payment of $778  for as long as you have Lifetime Reserve Days. Every Medicare Beneficiary starts out with 60 Lifetime Reserve Days. Since you only use them when you’ve had a hospital stay of longer than 90 days, you’re unlikely to use these. But, if you do, you’ll have to pay full price for your hospital stay after you’ve run out.

Since Part A operates on the concept of Benefit Periods, you’d potentially be exposed to these daily co-payments if you had two separate hospital stays longer than 60 days in events that were separated by at least 60 days. This would be extraordinarily rare, but it is possible, and highlights the potential for high out of pocket spending under Original Medicare.

Costs For Services Under Medicare Part B

The costs for Part B are much easier to calculate and keep track of. There is also a deductible. For 2023, the Part B deductible is $233.  You’ll have to pay this amount when you seek Part B coverage for the first time during the year. Once you’ve met it, Part B will begin helping you pay for your outpatient medical expenses.

Once Medicare starts helping with your costs, they’ll pay the first 80% of the Medicare-approved charges for Part B services and procedures. You’ll then be responsible for:

• 20% of the Medicare-approved costs
• Part B Excess Charges of up to 15%

Excess Charges are quite rare; they will only be charged by certain medical providers who don’t accept Original Medicare’s payment terms. Most providers do accept Medicare’s payment terms, so Excess Charges aren’t something you’ll have to be overly worried about.

You will pay these costs throughout the rest of the year. When the next calendar year begins, you’ll have to pay the Part B deductible again.

These out of pocket spending amounts for Part A and B can cause some discomfort. Unfortunately, there are more pieces missing from your Medicare coverage than just these out of pocket expenses. While the Part A deductible is not excessive, and paying 20% co-insurance isn’t too taxing, there are other ways you can be financially harmed by Medicare, due to the lack of:

• Out of Pocket Maximum limitations
• Prescription drug coverage
• Emergency coverage outside of the United States
• Routine dental, hearing, or vision coverage

All of these missing pieces in Medicare can be thought of as gaps in coverage. They are either services that you likely need, and used to get with other health insurance (like prescription drug coverage, dental, vision, and hearing), or protections that keep your spending from getting out of control (Out of Pocket Maximum limits).

In order to make up for these missing pieces of coverage, most Americans choose to add at least one of the private Medicare Insurance plan options available:

• Part D Prescription Drug Plans
• Medicare Supplement Insurance
• Part C Medicare Advantage Plans

All of these private options use Original Medicare, Parts A and B, as a base. Let’s review them each in turn.

Part D Prescription Drug Plans

Prescription Drug Plans (PDP) from private insurance companies are authorized under Part D of the Medicare program. They are regulated by the Centers for Medicare and Medicaid Services (CMS). Part D prescription drug coverage is available from two different types of plan:

• Medicare Advantage Plans
• Standalone Prescription Drug Plans

Medicare Advantage plans will be discussed in a separate section of this guide. Standalone Prescription Drug Plans are drug plans that don’t offer any medical benefits, only help with prescription drug costs. The way that prescription medications are covered works exactly the same way for both Medicare Advantage and standalone PDPs.

Standalone Drug plans usually come with these kinds of costs:

• A monthly premium
• An annual deductible
• Per-prescription co-payments or co-insurance

While all standalone drug plans have a monthly premium, not every plan has an annual deductible. This deductible works like the Part B deductible; once you’ve paid it, you’ll move on to paying co-payments or co-insurance for the rest of the year. You only pay the Part D deductible once. One interesting feature of standalone Prescription Drug Plans is that many times a plan will only enforce the deductible on more expensive medications. Cheaper medications, like generics, are often available for small co-payments right from the start of the year.

Every Part D drug plan has a Formulary, which is a formal list of all medications and vaccinations covered by the plan. All the medications on the Formulary are organized by their cost. Generic medications cost the least, and new, patented brand-name medications come with the highest costs.

You can enroll in the standalone drug plan of your choice when you first enter Medicare. It’s important to know that you can get Part D drug coverage if you're enrolled in either Part A or Part B. You don’t have to be in both.

Medicare Supplement Insurance

While standalone drug plans help with the cost of medication, but not with medical costs, Medicare Supplement Insurance does the opposite. Medicare Supplement plans, which are also known as Medigap plans, don’t provide any help with the cost of drugs, but they do help you with many of the out of pocket costs associated with Part A and B.

Medigap plans work in conjunction with Original Medicare. When you have Medigap coverage, Part A and B are considered your primary coverage. They will pay providers first. Your Medigap plan becomes a secondary payor. Your Medigap plan will pay after Medicare has paid; how much your plan pays depends on the specific coverage you selected.

Medicare Supplement Insurance coverage comes in ten standardized plans identified by letter. These plans are standardized throughout 47 of the U.S. states, so Medigap Plan N in Florida provides the same benefits as Plan N in New York (as an example). This is true regardless of which insurance company you use. Since these plans are standardized, it enables you to choose a plan based on only two criteria:

• Coverage desired (which standardized plan you want)
• Cost for coverage (which insurance company offers the plan you want at the best price)

In order to enroll in a Medicare Supplement Insurance plan, you must be actively enrolled in both Part A and B. In some states, you might have one additional requirement: you may have to be at least 65 years old. This is a state by state rule; in some states you can get Medigap coverage even if you’re younger than 65.

The best time to get Medigap coverage is when you first enroll in Medicare, during your Medigap Open Enrollment Period. If you do this, you’ll be able to get your coverage without answering any health related questions, and you’ll also be able to get coverage without your premiums being affected by your health status. If you don’t take advantage of this open enrollment opportunity, you’ll have to answer health questions if you try to enroll later. Depending on your health status, you might be declined, or charged a higher rate due to your health condition. The Medigap Open Enrollment Period lasts for six months and starts when you are at least 65 and also enrolled in Part B.

Part C Medicare Advantage Plans

Part C of Medicare refers to the Medicare Advantage program. Medicare Advantage plans are private health insurance plans that combine your Part A and B benefits. They also often include Part D drug coverage.

A Medicare Advantage plan works much differently than Medigap. Instead of paying what Medicare doesn’t, your Medicare Advantage plan will pay most of the costs for your care, and you’ll pay a co-payment.

The amounts you pay for service during the year get added up. If they reach your plan’s Out of Pocket Maximum (OOPM) amount, your spending on medical care is capped. Your plan pays all of your Medicare-approved medical expenses for the rest of the year. This is a huge improvement over Original Medicare (where your costs can be unlimited), and is one of the key reasons people choose Medicare Advantage coverage. Another reason is that many Medicare Advantage plans come with Part D drug coverage included.

You’ll be able to enroll in a Medicare Advantage plan when you’re active in both Part A and Part B. There are no age requirements.

Now that you’ve had Medicare Premiums for 2023 - Part A & B costs explained, you should be able to figure out what kind of private coverage will best fit your needs. If your needs change once you’ve chosen your first plan, you can use one of the Medicare enrollment periods to make changes to your coverage.