Retirees that are at least 65 years old and claim Social Security will soon see the largest increase to their benefits in more than 40 years. The Social Security Administration (SSA) recently announced that the cost-of-living adjustment will boost benefits by 8.7% in 2023.
With the average monthly Social Security check coming in at $1,628 for retirees in September, that means retirees can expect their monthly checks to increase to $1,770, or $21,240 annually.
The large majority of people who are at least 65 and receiving Social Security also claim Medicare, the federal health insurance program for folks 65 and older. Certain Medicare premiums, which will experience some changes in 2023 as well, are deducted from Social Security checks. Let's take a look at what kind of deductions from Medicare premiums retirees will see in their Social Security checks next year.
Assessing the cost of premiums
There are several different parts of Medicare. Most people do not have to pay premiums on Medicare part A, which covers services such as inpatient care, hospice care, nursing facilities, and some home healthcare costs because they paid Medicare taxes throughout their careers.
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Medicare part B premiums tend to be the costliest. Part B covers outpatient care, medical equipment, preventative services like vaccines, and some home health services. In 2022, the Medicare part B premium amount most people paid shot up nearly 15% from $148.50 to $170.10 per month. The increase was mainly due to Medicare covering a new Alzheimer's drug called Aduhelm.
But this year, Medicare decided to provide more limited coverage for Aduhelm, which will actually lead to a roughly 3% drop in standard Medicare part B premiums in 2023, from $170.10 to $164.90 per month. In fact, experts consider 2023 to essentially be a once-in-a-lifetime event because Social Security benefits are rising so much and Medicare part B premiums are falling.
Another positive for Medicare part B in 2023 is that deductibles are expected to decline from $233 this year to $226 next year.
Medicare part D premiums, which retirees can choose to have deducted from their Social Security checks and cover costs associated with various prescription drugs, are also expected to fall in 2023. The Centers for Medicare & Medicaid Services (CMS) expects part D premiums in 2023 to inch lower from $32.08 to $31.50, offering a small reprieve for seniors and retirees.
For those seniors who opt to get Medicare Advantage, they can also choose to have these premiums deducted from their Social Security checks. Medicare Advantage, which is insurance offered by private companies that contract with Medicare, covers all of the services provided in Medicare parts A, B, and D. Average Medicare Advantage premiums are expected to drop by about 8% from $19.52 to $18 per month next year.
How much is coming out of your benefits?
If your monthly Social Security check is $1,770 next year, then you can expect to see $164.90 deducted if you have standard Medicare part B premiums. While that's certainly a significant deduction, it is less than last year and comes at a time when benefits are going to increase. Those with Medicare Advantage and/or Part D coverage will have to look to their particular plan options to determine how much more (if any) they'll have taken out of their checks.
