Retirees have been closely following the projected large increase in Social Security benefits next year. But another thing they will want to keep an eye on is the cost of Medicare premiums.
Medicare is a federal health insurance program for those 65 years of age and older. Medicare premiums are also typically deducted straight from monthly Social Security checks, so their cost can weigh on benefits and the purchasing power of retirees.
There are several different parts of Medicare. Here's how much premiums for each part are expected to cost in 2023.
Part A
Medicare part A covers costs associated with inpatient care, nursing facilities, hospice care, and some home healthcare costs as well. Most retirees receive Medicare part A coverage for free because they paid Medicare taxes throughout their careers.
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If you or your spouse have worked for 40 quarters, or the equivalent of 10 years, or received Social Security, you would not have to pay for part A premiums. However, if you don't qualify for free Medicare part A, then you might have to pay up to $506 per month in premiums.
Part B
Medicare part B covers outpatient care, some home health services, medical equipment you might need, and preventative services like vaccines. Last year, Medicare part B premiums rose close to 15%, the largest increase in history due to Medicare's coverage of a new drug to treat Alzheimer's.
But for the first time in roughly a decade, Medicare part B premiums are slated to drop about 3% in 2023 for the first time in over a decade.
According to the Centers for Medicare & Medicaid Services (CMS), the standard monthly premium will drop from $170.10 to $164.90 next year. In addition, the annual deductible for all Medicare Part B beneficiaries is expected to drop from $233 this year to $226 next year.
Medicare Advantage
Medicare Advantage plans can cover all of the services provided in Medicare Parts A, B, and D, and may also offer some additional benefits such as eye care and dental services. Medicare Advantage is offered through private companies that Medicare contracts with.
The premiums can be cheaper than if you were getting traditional Medicare. You are still responsible for your part B premium to the government, although your Medicare Advantage plan may also pay for all or part of the premium.
One benefit of Medicare Advantage is that there is an annual limit on what you can pay out of pocket, while there is technically no limit under traditional Medicare. The drawback is that there may be more limited options when choosing providers.
CMS recently said it expects Medicare Advantage enrollment to reach 31.8 million by 2023. CMS also recently forecasted that the average premium for a 2023 Medicare Advantage plan will drop about 8% from $19.52 to $18 per month.
Part D
Medicare part D covers a variety of prescription drugs that people using Medicare take, which can include drugs to treat severe illnesses such as AIDS and different types of cancer.
Announced by CMS back in July, standard premiums for part D plans are expected to decline by about 1.8% from $32.08 to $31.50 per month in 2023.
The hope is that thanks to the passage of a new law that will soon enable Medicare to negotiate drug prices with pharma companies, these premiums can continue to decline in the years to come.
