Of the various expenses you'll face during retirement, healthcare will likely be a big one. It's important to understand what your Medicare costs will look like so you can accurately work them into your budget. Since Medicare changes from year to year, here's what to expect out of Parts A and B in 2021.
Medicare Part A
Medicare Part A covers hospital and skilled nursing care. Most enrollees don't pay a premium for it. However, you'll still face other costs under Part A:
- A $1,484 deductible for each hospital stay per benefit period (a benefit period begins the day you're admitted to a hospital or skilled nursing facility and ends when you've been out for 60 days in a row)
- $371 per day in coinsurance for days 61-90 of a hospital visit (days 1-60 do not incur a coinsurance charge)
- $742 per day in coinsurance for days 91 and beyond in a single hospital stay, which come out of your 60-day pool of lifetime reserve days
- $185.50 per day in coinsurance for days 21 through 100 of care in a skilled nursing facility (days 1-20 do not incur a coinsurance charge)
Keep in mind that if you manage to exhaust your lifetime reserve days for a hospital stay, you'll be charged the full cost of your care.
Image source: Getty Images.
Medicare Part B
Medicare Part B covers outpatient services like diagnostic tests and doctor visits. If you're signed up for Social Security, you'll have your monthly part B premiums deducted directly from your benefits. If you're not yet on Social Security, you'll need to pay those yourself, though you can sign up to have them paid automatically from your bank account.
The standard monthly Part B premium in 2021 will be $148.50. However, if you're a higher earner, you'll pay more, as follows:
|
Income: Single Tax Filer |
Income: Joint Tax Filer |
Income: Married Filing Separately |
Monthly Part B Premium for 2021 |
|---|---|---|---|
|
$88,000 or less |
$176,000 or less |
$88,000 or less |
$148.50 |
|
Over $88,000 up to $111,000 |
Over $176,000 up to $222,000 |
Not applicable |
$207.90 |
|
Over $111,000 up to $138,000 |
Over $222,000 up to $276,000 |
Not applicable |
$297.00 |
|
Over $138,000 up to $165,000 |
Over $276,000 up to $330,000 |
Not applicable |
$386.10 |
|
Over $165,000 and less than $500,000 |
Over $330,000 and less than $750,000 |
Over $88,000 and less than $412,000 |
$475.20 |
|
$500,000 and above |
$750,000 and above |
$412,000 and above |
$504.9 |
Data source: Medicare.gov.
Keep in mind that these numbers are based on the income you reported on your 2019 taxes.
In addition, you'll be subject to an annual Part B deductible of $203. Once your deductible is met, you'll generally pay 20% of the Medicare-approved amount for most services as coinsurance, including any durable medical equipment you might need. Keep in mind that Part B does not cover prescription drugs. The amount you'll spend on premiums and copays will depend on the Part D plan you sign up for, and like Part B, you'll pay more for your coverage if you're a higher earner.
Know your costs
Clearly, there's the potential to spend a lot of money out of pocket on Medicare in the coming year, so it's crucial to know what to expect in advance. You'll also need to think about where the money to pay your healthcare costs will come from. If you have funds in a health savings account, that's a good start. Otherwise, you may need to rely heavily on your retirement savings and Social Security income to keep up with your medical bills. The amount you'll spend in 2021 will ultimately depend on how extensively you need to use Medicare, but it's best to know what expenses you could potentially be in for.
