Medicare Part B Costs Are Dropping in 2023, but Your Medical Expenses Might Not. Here's Why

Being too optimistic about your healthcare expenses could come back to bite you.

For the first time in years, the Medicare Part B premium and deductible are expected to drop in 2023. This is great news for seniors who have been struggling with inflation this year, but it might not help you as much as you'd expect.

Here's a look at how much Medicare Part B costs are expected to drop next year and why you could still face rising healthcare costs.

How are Medicare's costs changing next year?

Original Medicare consists of two parts -- A and B. Part A is hospital insurance and this kicks in if you need to stay in the hospital or a long-term care facility. Part B is medical insurance and this covers most standard doctor visits and outpatient care.

Part B's 2022 premium is $170.10 per month for most people, but higher earners pay more. The deductible is currently $233. In 2023, the typical monthly premium will fall to $164.90 and the deductible will drop to $226.

But Part A's costs are rising a little next year. Most people don't have to pay a premium for this, but the deductible will climb from $1,556 to $1,600 in 2023. This may not matter to you if you don't have to use your Part A coverage in 2023, but there are no guarantees.

Health issues can crop up unexpectedly, leading you to spend more on healthcare than you anticipated. Even a single hospital stay could negate any savings benefit you get from the small dip in Part B expenses.

You could also wind up paying more next year if you have a Medicare Advantage (Medicare Part C) or a Medicare Part D plan for prescription drug coverage. These plans are offered by private health insurers and their prices can vary. If yours goes up, you could still spend more on Medicare in 2023 than you did this year.

How to keep your medical costs as low as possible

Doing everything you can to stay healthy, including eating well and exercising regularly, is key to reducing your risk of health issues. But you still need to take extra steps to prepare yourself for unexpected health conditions.

Original Medicare has a lot of gaps, so you may want to look into supplemental coverage to reduce your out-of-pocket costs in the event of a serious illness or injury. Some people do this by opting for a Medicare Advantage plan over Original Medicare. Unfortunately, the open enrollment period that enables you to choose a new Medicare plan for 2023 is closed. But you may still be able to do so if you're signing up for Medicare for the first time or you qualify for a special enrollment period due to the loss of other insurance.

You could also look into a Medicare supplement plan. This is a separate insurance policy with its own premiums and deductibles that helps cover some of the things Original Medicare doesn't. It might also be difficult to secure one of these outside of the annual open enrollment period. But it doesn't hurt to inquire with a few insurance companies to see if it's still an option.

Those who saved money in a health savings account (HSA) can rely upon these funds to help cover their healthcare expenses in retirement. Keep in mind that you can no longer contribute funds to an HSA once you sign up for Medicare. But you can continue to use the money you already have, and if you spend it on medical expenses, it's tax free.

Everyone wants to be optimistic about their health in retirement, but being too optimistic can be dangerous financially. Review your retirement healthcare plans now and make sure you're doing all you can to prepare yourself for the unexpected.