Medicare provides essential coverage for healthcare costs for most Americans 65 or older, and the demographic shift that has resulted in a flood of new retirees over the past decade has made the Medicare program larger than ever. Unfortunately, having more people in the program means higher costs, and Medicare relies on a variety of funding sources to ensure that the government will have enough money to cover those costs.
A big part of the way that the Medicare program gets money to cover outpatient healthcare costs like doctor visits is through the premiums that most plan participants have to pay every month. The Centers for Medicare & Medicaid Services announces the base monthly premium amount each year, and the number for 2020 is slated to be $144.60 per month. That's $9.10 higher than it was in 2019, and while that might not sound like a huge increase, it's the biggest that the program has seen since 2017's $12.20-per-month hike.
Data source: Centers for Medicare & Medicaid Services. Chart by author.
Most retirees have their Medicare Part B premiums taken directly out of their Social Security checks, so they might not even notice the boost. However, with the cost-of-living adjustment for Social Security in 2020 amounting to just 1.6% -- or about $23 per month for the typical retiree -- losing $9.10 of that increase to higher Medicare premiums will make their net Social Security checks go up by even less.
Costs for the Medicare program have typically gone up in spurts in the past, and the big increase for 2020 seems to be the latest in the cycle of upticks for the measure. Retirees have to hope that future increases will be more moderate. But if the past is any guide, this could be just the beginning of a series of similar premium hikes that could come in 2021 and beyond.
