Health care already accounts for about 10% of spending, on average, by households headed by seniors. And 2021 brings more bad news for the pocketbooks of seniors on Original Medicare.
Several premiums and deductibles for folks with the traditional Medicare health insurance are increasing for the new year, the federal government announced Nov. 6.
The rising costs include the:
- 2021 Medicare Part B standard premium: $148.50 per month, an increase of $3.90 from $144.60 in 2020. That’s compared with an increase of $9.10 per month one year prior.
- 2021 Medicare Part B deductible: $203 per year, an increase of $5 from $198 in 2020. That’s compared with an increase of $13 one year prior.
- 2021 Medicare Part A inpatient hospital deductible: $1,484, an increase of $76 from $1,408 in 2020. That’s compared with an increase of $44 one year prior.
One consolation is that the Part B standard premium and deductible will not increase by as much as they did for 2020. This is partly due to a recent federal law that limited the increase in Part B premiums for 2021.
Still, the Medicare cost increases for 2021 will effectively negate part of the 1.3% cost-of-living adjustment, or COLA, that increases retirees’ monthly Social Security benefit payments in the new year. For the average retiree, the 2021 COLA translates to just an extra $20 a month.
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. That is, they get this break because they had Medicare taxes withheld from their paychecks during their working years.
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 Medicare Part A
Part B premiums are based on income. The standard monthly premium listed above applies to individuals who earn up to $88,000 and married couples who earn up to $176,000 and file a joint federal tax return.
Folks with higher incomes pay higher Part B premiums — which will be anywhere from $207.90 to $504.90 next year, depending on income.
Medicare Advantage premiums projected to fall
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. The costs of Original Medicare generally include the premiums and deductibles above.
Medicare Advantage plans are an all-in-one alternative to the traditional program offered by private insurance companies. The costs of Medicare Advantage plans, including any premiums and deductibles, vary by plan and insurer.
On average, though, Medicare Advantage premiums for 2021 are expected to be 34% lower than they were for 2017, according to the Centers for Medicare & Medicaid Services, the federal agency that oversees the Medicare program.
In fact, the average 2021 Medicare Advantage premium will be the lowest since 2007.
To learn more about Medicare Advantage plans for the new year, check out “8 Extra Benefits in Most Medicare Advantage Plans for 2021.”
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