Medicare Changes in 2021

The Centers for Medicare and Medicaid Services (CMS), the federal agency that manages the Medicare and Medicaid programs, recently announced changes to Medicare premiums and benefits that go into effect on January 1, 2021.

Medicare Part A

Medicare Part A covers inpatient hospital, skilled nursing facility and some home health services. If you have paid into Medicare for at least 40 quarters, there is no premium for Medicare Part A. According to CMS, 99% of Medicare beneficiaries do not pay a premium for Part A.

The Medicare Part A deductible that beneficiaries are expected to pay when receiving services is $1,484 in 2021, an increase of $76 from 2020.

Medicare Part B

Medicare Part B covers services such as physicians, outpatient hospital procedures, durable medical equipment and certain home health services not covered by Part A.

The standard monthly premium for Part B will be $148.50 in 2021, an increase of $3.90 from the 2020 premium. The annual deductible for Part B is $203 in 2021, an increase of $5 from 2020.

Higher income Medicare beneficiaries pay an additional surcharge for Part B services. The surcharge is called the Income-Related Monthly Adjustment Amount (IRMAA). IRMAA is divided into six income brackets. The following table shows the 2021 IRMAA for individuals and married couples filing jointly.

*Surcharge per person

Medicare Part D

Medicare Part D covers prescription drug costs. Here are some of the notable changes in the program. Please note that these are only general guidelines. Medicare Part D coverage can be complex. The prescription drugs covered and the amount you pay can differ significantly depending on the provider you use and the type of plan you choose. Check with your provider about the cost of the prescription drugs you use under your plan.

• The 2021 standard initial deductible will increase $10 to $445.00. This means you will need to pay $445 out-of-pocket for prescription drugs before Medicare Part D benefits begin.
• The 2021 Initial Coverage Limit increases $110 to $4,130. This means you receive a slightly higher benefit before entering a coverage gap where benefits may decline. Check with your Medicare Part D provider to see how the coverage gap affects you.
• You exit the coverage gap when you spend $6,550 out-of-pocket on prescription drugs ($200 more than in 2020). This places you in the catastrophic coverage phase of your Medicare Part D plan.

Medicare Part C: Medicare Advantage Plans

Medicare Advantage Plans, also called Part C, are “all-in-one” alternatives to original Medicare. Part C plans are offered by private companies approved by Medicare. Medicare Advantage Plans “bundle” Part A, Part B and, usually, Part D. Many of these plans also cover vision, hearing, dental and fitness programs not covered by original Medicare. Before choosing a Medicare Advantage Plan, check that your doctors participate in the Plan’s network, whether you need a referral to see a specialist, your out-of-pocket costs and whether your prescription drugs are covered.

Medicare pays a fixed amount each month to the Medicare Advantage Plan you’ve chosen. Because Part C includes Part B benefits, you still pay Medicare Part B premiums and surcharges. Depending on the Medicare Advantage Plan you choose, you may also pay an additional premium for Medicare Part C.

Medigap

Medigap is Medicare Supplemental Insurance that fills gaps in original Medicare Parts A and B such as copayments, coinsurance and deductibles. You are only guaranteed Medigap coverage if you enroll within 6 months of enrolling in Part B. Medigap policies do not cover Part D. You cannot combine a Medigap policy with a Medicare Advantage Plan. Medigap is sold by private companies. Medigap premiums vary by the state in which you live and the “tier” of service you choose. You will need to contact your Medigap provider to determine how your costs may change in 2021.

Medicare provides basic health coverage for most Americans over age 65. Year-to-year changes in coverage and premiums can have a major impact on the out-of-pocket costs of health care for seniors. At the same time, the program is complex. This article is intended to provide a summary on how Medicare costs will change in 2021. To understand how your health care costs may change in 2021 for your Part C plan and Medigap policy, please contact your Medicare Advantage or Medigap provider directly.

December 2020