There are some changes to Medicare and Social Security coming in 2022 that you should be aware of. They’ll include increases in your Social Security benefits, as well as changes to Medicare premiums and deductibles. Let’s take a few moments to discuss those changes so that you can be financially prepared for the new year!
Social Security COLA Increase
Each year, the Social Security Administration (SSA) considers increasing the benefits for retirees. This is done in a systematic way, using a federal index of consumer goods and services. The index they look at is called the CPI-W. Costs from the third quarter of one year to the third quarter of the next are analyzed for inflation. If there is an increase, the SSA considers an increase in benefits. If there is not, which has happened three times since the practice began, there is no increase in benefits.In 2022, retirees will enjoy a 5.9% increase in their Social Security benefits. This increase is referred to as the COLA or Cost-of-Living Adjustment. On average, retirees will see an increase of $71 in their monthly benefits.
Medicare Costs in 2022
Healthcare costs, inflation, and other factors have contributed to the changes we’ll see in the Medicare program starting in 2022. Premiums and deductibles will be increasing in nearly every aspect of the program. Let’s talk about each of the changes individually.
Medicare Part A
Most Medicare beneficiaries receive premium-free Part A, so they won’t notice any change in premium. If you’ve paid Medicare taxes for forty quarters (or ten years), you will not pay a penny for your Part A premium. (You are also eligible for premium-free Part A if you haven’t paid Medicare taxes that long, but your spouse has.) If you haven’t, your premium will be based on the number of quarters you did pay Medicare taxes.If you paid into Medicare for at least 30 quarters, your monthly premium would be $274. Any less than that, and you’ll pay the full Part A premium of $499 per month.The deductible is also moving from $1484 to $1556. This premium is paid per benefit period, not annually. A benefit period begins the first day you become an inpatient at a hospital and ends after you have spent 60 consecutive days out of the hospital. It’s possible to pay the Part A deductible multiple times in one year.The deductible is not the only cost associated with Part A. Your coinsurance amount will be based on how much time you have spent as an inpatient. Up to day 60, your coinsurance is $0 after the deductible has been met. From days 61-90, you’ll pay $389 per day, which is up $18 from 2021. If you haven’t used your 60 lifetime reserve days after day 90, your cost per day is $778, up $36 from 2021.No one receives Medicare Part B for free, though some may receive financial assistance from a variety of federal and state programs.
Medicare Part B
No one receives Medicare Part B for free, though some may receive financial assistance from a variety of federal and state programs. Most beneficiaries pay the standard premium, which is being increased by $21.60 beginning in 2022. The standard Part B premium will be $170.10. Those who earn high incomes may pay more for their Part B premium. Your rate is determined by using your Modified Adjusted Gross Income from your tax return two years prior. The first premium increases at $91,001 for individuals and then $182,001 for married couples who file jointly. At those thresholds, your premium will increase by $68, for a total monthly payment of $238.10 per person.The Part B deductible, which is only paid once per year, is increasing to $233. This is just a $30 increase from the previous year.
Medicare Part D
Premiums for Part D prescription drug plans will vary since these plans are sold by private insurance carriers. We’ve seen an increase in some, but we’ve also seen some plans decrease their premiums.One thing most plans have in common is the Part D deductible. The standard deductible is moving to $480 in 2022. This is the maximum deductible that any plan can employ, but they can choose to lower the deductible if they want. The deductible increased by $35 from 2021.The other feature that all Part D plans have is catastrophic coverage. There are several phases to Part D plans: the deductible phase, the initial coverage phase, the coverage gap, and finally, catastrophic coverage. Once you have reached catastrophic coverage, your plan will cover almost all of your prescription costs. However, the amount you must pay out-of-pocket to reach that catastrophic threshold is $7050 in 2022. This is a $500 increase from 2021.
Causes for Medicare Rate Increases
What is the reason for all these increases? While increases are not uncommon, the significant jump in the Part B premium is the highest in history. After announcing the new rates on November 12, CMS cited three main reasons for the jump.Healthcare costs are on the rise, especially for older adults, since they require more care than the younger population. Plus, COVID-19 expenses increased the usual amount even more. The COVID-19 pandemic also caused CMS to reduce its usual rate increase in 2021. Last year there was just a $3 increase in the Part B premium. However, CMS must pay that money back to the government. The payback timeline begins in 2022.A new drug is the biggest cause for the higher rates. Recently the Food and Drug Administration (FDA) approved a drug to treat Alzheimer’s – Aduhelm. While Medicare has not approved coverage for the drug yet, it is trying to proactively manage the cost with increased premiums. Aduhlem is expected to cost $56,000 per year for just one individual.We are always looking for ways to help our clients save money, and this year is no different. If you are concerned about the increased premiums, call our office to set up a consultation. We can look at your current plan and compare them to other options that may decrease your healthcare expenses.
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