Traditional Medicare Premiums Will Soar in 2022

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Health care already accounts for about 14% of spending by the typical household headed by a senior. And 2022 will bring more bad news for the pocketbooks of seniors on Original Medicare.

Premiums and deductibles for folks with this traditional Medicare health insurance coverage are jumping for the new year, the federal government announced Nov. 12.

The rising costs include the:

  1. 2022 Medicare Part B standard premium: $170.10 per month, an increase of $21.60 from $148.50 in 2021. That’s compared with an increase of $3.90 per month one year prior.
  2. 2022 Medicare Part B deductible: $233 per year, an increase of $30 from $203 in 2021. That’s compared with an increase of $5 one year prior.
  3. 2022 Medicare Part A inpatient hospital deductible: $1,556, an increase of $72 from $1,484 in 2021. That’s compared with an increase of $76 one year prior.

This means Medicare cost increases for 2022 will effectively reduce the 5.9% cost-of-living adjustment, or COLA, that increases retirees’ monthly Social Security benefit payments in the new year. For the average retiree, the 2022 COLA translates to an extra $92 a month.

It’s not uncommon for increases in Medicare premiums to 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.

What Medicare Parts A and B cover

Medicare Part A covers the following types of care:

  • Inpatient hospital services
  • Skilled nursing facility services
  • Some home health care 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.

Medicare Part B covers the following types of care:

  • Physician services
  • Outpatient hospital services
  • Certain home health services
  • Durable medical equipment
  • Certain other medical and health services not covered by Part A

Part B premiums are based on income. The standard monthly premium listed above applies to individuals who earn up to $91,000 and married couples who earn up to $182,000 and file a joint federal tax return.

Folks with higher incomes pay higher Part B premiums — which will be anywhere from $238.10 to $578.30 for 2022, depending on income and federal tax-filing status.

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 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, Part D premiums for 2022 are expected to be $33 per month, up from $31.47 one year prior, according to the Centers for Medicare & Medicaid Services, the federal agency that oversees the Medicare program. Medicare Advantage premiums for 2022 are expected to average $19 per month, down from $21.22.

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