Editor’s Note: This article has been updated to reflect the projected average Medicare Advantage premium, which was announced on Sept. 29.
Despite inflation running near a 40-year high, some Medicare costs are set to buck the trend.
The premium and deductible for Medicare Part B will decrease for 2023, the federal government announced Sept. 27. The average premiums for Part D and Medicare Advantage also are expected to drop.
The Part B decreases stem partly from the Centers for Medicare & Medicaid Services’ April 2022 decision to only cover the cost of a new treatment for Alzheimer’s disease, Aduhelm (aducanumab), in limited situations. The treatment was approved by the Food and Drug Administration via an accelerated process rather than the FDA’s traditional approval process.
The Centers for Medicare & Medicaid Services, the federal agency that oversees the Medicare program, explained:
“Lower-than-projected spending on both Aduhelm and other Part B items and services resulted in much larger reserves in the Part B account of the Supplementary Medical Insurance (SMI) Trust Fund, which can be used to limit future Part B premium increases. The decrease in the 2023 Part B premium aligns with the CMS recommendation in a May 2022 report that excess SMI reserves be passed along to people with Medicare Part B coverage.”
Medicare Part B costs
Part B is the component of Medicare that typically covers outpatient care, such as physician services, outpatient hospital services and durable medical equipment.
Its falling costs are the:
- 2023 Medicare Part B standard premium: $164.90 per month, a decrease of $5.20 from $170.10 in 2022. That’s compared with an increase of $21.60 per month for the prior year.
- 2023 Medicare Part B deductible: $226 per year, a decrease of $7 from $233 in 2022. That’s compared with an increase of $30 for the prior year.
For many people on Medicare, their Part B premium is deducted automatically from their monthly Social Security payment.
This means the decreased Part B premium for 2023 will effectively leave them more of their 2023 Social Security cost-of-living adjustment (COLA) to spend on other costs — a rare situation.
More commonly, increases in Medicare premiums eat up at least a chunk of an increase in the Social Security COLA. This stems in part from how these amounts are determined: Social Security COLAs are tied to inflation, while Medicare premiums are tied to the Medicare program’s per-person cost, which often outpaces inflation.
As we reported in “2 Things That Hurt Social Security’s Inflation Protection,” Social Security COLAs averaged 2.2% between 2000 and 2020, while annual increases in the Part B premium averaged 5.9% during the same period, according to the Center for Retirement Research at Boston College.
The Social Security COLA for 2023 — which is expected to be the highest in decades — will be announced in mid-October.
Part B Income-Related Monthly Adjustment Amounts
Medicare Part B premiums are based on income. For 2023, the standard monthly premium listed above applies to:
- Individuals, and married people filing separate federal income tax returns, who earn up to $97,000
- Married couples filing joint returns who earn up to $194,000
Folks with incomes above those thresholds — about 7% of people with Part B — pay higher premiums, which will range from $230.80 to $560.50 per month in 2023, depending on income and federal tax-filing status. This is because what’s known as an Income-Related Monthly Adjustment Amount, or IRMAA, is tacked on to their Part B premium.
For a breakdown of all Part B IRMAAs for 2023, see the two charts titled “Full Part B Coverage” in the Sept. 27 announcement from the Centers for Medicare & Medicaid Services.
Medicare Part A costs
Medicare Part A typically covers inpatient care, such as inpatient hospital services as well as skilled nursing facility services.
About 99% of Medicare beneficiaries don’t have to pay a premium for their Part A coverage due to how long they worked and therefore had Medicare taxes withheld from their paychecks. They might face other Part A costs in certain situations, however.
These costs can include the following, all of which are set to tick upward, as they typically do each year:
- 2023 Medicare Part A inpatient deductible (for the first 60 days of a hospitalization in a benefit period): $1,600, up from $1,556 in 2022.
- 2023 Medicare Part A coinsurance (for the 61st through 90th day of a hospitalization in a benefit period): $400 per day, up from $389 in 2022.
- 2023 Medicare Part A coinsurance for lifetime reserve days: $800 per day, up from $778 in 2022.
- 2023 Medicare Part A skilled nursing facility coinsurance: $200 per day, up from $194.50 in 2022.
Medicare Advantage and Part D premiums
Original Medicare and Medicare Advantage are the two main types of Medicare.
Original Medicare is the traditional Medicare program offered directly by the federal government that includes Medicare Part A and Part B. Folks with Original Medicare also have the option of buying a Medicare Part D plan, which covers prescription drugs, from a private insurance company.
Medicare Advantage plans are an all-in-one alternative to the traditional program offered by private insurance companies that contract with the federal government. Folks with Medicare Advantage generally cannot buy separate Part D plans, but the vast majority of these plans include prescription coverage.
Because Medicare Advantage and Part D plans are offered by private insurers, their costs, including any premiums and deductibles, vary by plan and insurer.
On average, though, Medicare Advantage premiums for 2023 are expected to be $18 per month, down nearly 8% from $19.52 in 2022, according to the Centers for Medicare & Medicaid Services.
The standard Part D premiums for 2023 are expected to average $31.50 per month, down 1.8% from $32.08 in 2022.
Part D Income-Related Monthly Adjustment Amounts
Medicare Part D premiums are based on income. For 2023, taxpayers with the following incomes — which is roughly 8% of people with Part D — will pay more:
- Individuals, and married people filing separate federal income tax returns, with a modified adjusted gross income (MAGI) of more than $97,000
- Married couples filing joint returns with a MAGI of more than $194,000
Specifically, folks with incomes in these ranges will pay an Income-Related Monthly Adjustment Amount (IRMAA) in addition to the standard Part D premium. For 2023, these additional amounts will range from $12.20 to $76.40 per month, depending on income and federal tax-filing status.
For a breakdown of all Part D IRMAAs for 2023, see the last two charts in the Sept. 27 announcement.
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