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For retirees, a new year means adjusting to changes in several Medicare costs, including premiums, deductibles and copays.
For 2023, some of those costs will be higher than this year, while others will decrease. While each change won’t necessarily involve a huge dollar amount, experts advise considering how they might affect your health care spending.
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“It’s important to always watch the Medicare numbers that change so you can budget accordingly,” says Danielle Roberts, co-founder of insurance company Boomer Benefits.
In general, your coverage choices affect how much you pay in premiums, deductibles, and copays or coinsurance. And how often you use the health care system can, of course, add to your costs.
Income is also a determining factor. beneficiaries with limited income may qualify for Medicaid or other programs that help cover out-of-pocket costs. On the other hand, higher-income beneficiaries pay more for certain parts of the coverage (more on that below).
Basic Medicare consists of Part A (hospital coverage) and Part B (outpatient care). Many beneficiaries stick to basic Medicare, often combining it with a standalone Part D plan. Some also buy a supplement plan – aka “Medigap” — which picks up some of the costs associated with basic medical care, such as coinsurance or copays.
Other beneficiaries — about 45% of Medicare’s 64.5 million insured — choose to have their Part A and B benefits delivered through Advantage Plans, which are offered by private insurers.
Those plans usually include Part D (prescription drug coverage), as well as extras such as dental, hearing, or vision. Unlike standard Medicare, they also have out-of-pocket maximums.
Most Medicare beneficiaries do not pay a Part A premium because they have enough work history — at least 10 years — to pay through payroll taxes into the system to qualify.
However, if you don’t meet the minimum requirement, monthly premiums could go up to $506 per month next year, depending on whether you have paid any taxes in the Medicare system. That maximum has increased from $499 in 2022.
Regardless of whether you pay a premium, there are cost-sharing aspects that come with Part A.
For those who don’t have additional coverage beyond basic Medicare, the amount you’d pay at hospitalization next year will be $1,600, up from $1,556 in 2022. That covers the first 60 days of inpatient hospital care in a benefit period.
For the 61st through 90th days of hospitalization, those beneficiaries pay $400 per day, up from $389 in 2022, and then $800 per day for “lifetime reserve” days, up from $778.
It’s worth noting that Advantage Plans have their own cost structure, meaning the amount you pay at the hospital depends on the specifics of the plan.
The standard Part B premium will be lower in 2023 – $164.90, down from $170.10 in 2022.
While a premium cut is unusual, the Medicare program ran in surplus this year due to lower-than-expected spending on Aduhelm, a new Alzheimer’s drug, as well as other Part B components and services, according to the Centers for Medicare & Medicaid services.
While most beneficiaries pay the standard premium, insured persons with higher incomes pay more due to means-tested supplements (see table below).
“However, they are calculated based on two years prior income,” said Elizabeth Gavino, founder of Lewin & Gavino and an independent broker and general agent for Medicare plans.
So for 2023, the determination would be based on your adjusted gross income for 2021. If your income has decreased since then, the Social Security Administration has a form for you to fill out to request a reduction.
The deductible for part B also goes down. It will be $226 in 2023, up from $233 this year. Once you meet that deductible, you typically pay 20% of the covered services. Note that beneficiaries in Advantage Plans may pay a different amount through copays, and Medigap policies cover all or part of that coinsurance.
While Advantage Plan premiums vary by plan — the average for 2023 will be $18 per month, down from $19.52 this year — all costs are in addition to your Part B premium. And some of those options have no monthly fees or pay your Part B premium. (If you don’t like your benefit plan, you can switch it or drop it in the first three months of the year.)
The maximum out-of-pocket limit for Advantage Plans will be $8,300 in 2023 for in-network services. For plans including out-of-network, that limit would be $12,450.
The average monthly premium for Part D coverage in 2023 is estimated to be $31.50, slightly down from $32.08 this year. And while not everyone pays a deductible for Part D — some plans don’t have one — the maximum it can be is $505 in 2023, up from $480.
Part D also includes monthly means-tested allowances for higher incomes.
In addition, changes are in effect that will reduce the cost of some medications, as a result of the Inflation Reduction Act, which took effect in August.
To begin with, there will be one from January 1 $35 monthly cap on insulin cost sharing section D, and the excess does not apply to the covered insulin product.
“Now many seniors don’t have to choose between groceries and their life-saving insulin,” Gavino said.
For beneficiaries who use insulin through a traditional pump — which falls under Part B — benefits begin July 1.
In addition, starting January 1, there will be no cost-sharing for recommended Part D inoculations, including the shingles vaccine.