Millions of seniors rely on Medicare to cover their health-related needs in retirement. But one major misconception about Medicare is that the program is entirely free. In reality, it's very expensive, and worse yet, its costs have the potential to climb, significantly, from year to year. In fact, seniors on Medicare can expect some rather notable changes going into 2020. Here are a few reasons enrollees will be looking at higher out-of-pocket costs in the new year.
1. Higher Medicare Part B premiums
The current standard monthly premium for Medicare Part B, which covers diagnostics, outpatient services, and preventive care, is $135.50. Beginning in 2020, this figure will climb to $144.60. That's an extra $109 a year on Part B premiums alone for seniors whose incomes don't subject them to a surcharge. Single tax filers with incomes above $87,000, or joint tax filers will incomes above $174,000, pay what's known as an income-related monthly adjustment amount, or IRMAA, on top of the standard premium.
2. Higher Medicare Part B deductibles
Enrollees are required to meet a deductible before Medicare covers their healthcare services. Currently, the annual deductible for Medicare Part B is $185, but come 2020, it's rising to $198. The good news for higher earners is that they're not liable for a higher deductible; IRMAAs apply to premiums only. But for lower-income seniors, an extra $13 a year is a tough pill to swallow, especially during a year when Social Security's cost-of-living adjustment is notably stingy.
3. Higher hospital costs under Medicare Part A
Most Medicare Part A enrollees don't pay a premium for that coverage. But like Part B, deductibles do come into play with Part A. Currently, enrollees requiring inpatient hospital services pay a deductible of $1,364 per benefit period. Beginning in 2020, that deductible is rising to $1,408.
The amount of coinsurance hospital patients are liable for is also going up. Right now, it's $341 per day for Days 61-90 of a hospital stay, and $682 per day for each lifetime reserve day past Day 90. (Seniors get a limited number of reserve days in their lifetime; once depleted, they assume full costs themselves.) Beginning in 2020, coinsurance will equal $352 per day for Days 61-90, and then $704 per lifetime reserve day.
Know your costs
The fact that Medicare costs are increasing is hardly good news, but you're better off knowing what to expect in the coming year than being in the dark. If you're already on Social Security, your larger Part B premiums will be deducted automatically from those payments, but you'll need to fork over larger deductibles as you require healthcare services throughout the year. Remember, too, that the above increases apply to Parts A and B of Medicare only; your Part D drug plan premium may have increased as well, so check your plan to see what you'll be paying.
If you have funds sitting in a health savings account, you can use them to pay your Medicare premiums and deductibles. If not, you'll need to budget carefully so you're not left cash-strapped in light of these new numbers.