With inflation in the United States at a 40-year high, the strain on budgets across households in the United States continues to increase.
And it’s not just due to the rising housing, food, and gas rates.
Medical costs, like doctor’s fees, hospital services and visits, and health insurance, aren’t immune to inflation and can play a significant role in your budget.
If you have Medicare coverage, you may wonder how inflation might influence your medical costs. Read on to find out.
According to the Bureau of Labor Statistics (BLS), inflation is an increase in the prices of public goods and services that a person pays over a specific period of time.
When inflation gets too high, everything gets more expensive, and your cost of living goes up.
Since July, people living in the United States have seen a 2.4% increase in health insurance costs.
This includes the more than 62 million Americans currently enrolled in Medicare.
“A lot of this population is retired, with many likely on a fixed income,” explains Ari Parker, bestselling author and lead Medicare advisor at Chapter.
“What this means is that they often have to pay for healthcare bills from their hard-earned savings. An unexpected medical bill for an expensive prescription drug or a doctor’s visit could set someone back thousands of dollars.”
Here are some of the primary ways inflation can drive up your Medicare costs:
According to the Centers for Medicare & Medicaid Services (CMS), people with Medicare coverage have seen a 15% increase in deductibles for necessary outpatient services covered under Medicare Part B in 2022.
“The hospital deductible that beneficiaries pay if they are admitted to the hospital will be $1,600 in 2023,” Parker says. “This is an increase of $44 from $1,556 in 2022.”
Part B coverage requires monthly premium payments. A high rate of inflation throughout 2021 led to an increase in monthly Medicare Part B premiums.
As inflation skyrocketed in 2022, so did Part B premiums, by approximately 14%.
“There is some good news when it comes to healthcare expenses in 2023,” says Parker. “Medicare recently announced that its Part B plan premiums will drop next year by about 3%.”
So, if you have full Part B coverage, you can expect your monthly premium to drop next year.
Prescription drug coverage
One of the largest contributors to rising healthcare costs in the United States is the cost of prescription drugs.
High drug prices often lead to poorer health outcomes. When you’re unable to afford your medication, you’re less likely to take it regularly, and it’s also less likely to work as effectively.
According to the U.S. Department of Health & Human Services (HHS), inflation in 2022 led to a 50% increase in average drug prices.
Because drug manufacturers are unregulated, it’s not uncommon for drug prices to exceed the inflation rate.
A 2022 report by the HHS’s Office of the Assistant Secretary for Planning and Evaluation (ASPE) found that prices of certain medications doctors prescribe to treat lymphoma and leukemia increased by more than $20,000 in 2022.
In addition, pricing for several chronic heart failure and hypertension drugs jumped by more than 500%.
The Inflation Reduction Act, signed in August 2022 by President Joe Biden, will introduce specific measures to help minimize the effects of rising U.S. healthcare costs.
“These changes will include provisions that put a cap on out-of-pocket costs for millions of Medicare beneficiaries, and make vaccines free to enrollees,” Parker explained. “They’ll also allow the Medicare program to negotiate the prices of some medications directly with drug manufacturers for the first time in its history.”
The new law will impact people with Medicare in the following ways:
- Beginning in October 2022, drug makers will start to pay rebates to Medicare for drugs included in Part D coverage if the price increases exceed the rate of inflation. Your prescription drugs, as a result, will increase at a much slower rate.
- In 2023, out-of-pocket costs for insulin will be capped at $35, even if you haven’t met your Part D deductible.
- In 2024, if your income is 150% below the federal poverty live (FPL), you’ll become eligible for the low-income subsidy under the Part D program. In addition, premiums for Part D cannot increase by more than 6% per year.
- From 2026 to 2029, you may likely start to see a reduction in your prescription drug costs as Medicare-negotiated drug prices start to take effect.
Increases in healthcare costs due to inflation can affect your budget and health.
According to the results of a June 2022 Healthy Minds Monthly Poll conducted by the American Psychiatric Association (APA), approximately 90% of U.S. adults report feeling anxious or very anxious about the effects of inflation.
In addition, nearly 50% of U.S adults also worry about losing their source of income.
There are multiple ways to cope with an increase in healthcare costs.
Apply in time
“The annual enrollment period kicks off on October 15 and runs through December 7,” says Parker. “This limited timeframe of a little more than 50 days gives Americans the most flexibility when it comes to deciding whether to enroll in a Medicare plan for the first time or choose to change their coverage.”
Too many people, however, fail to take advantage of this timeframe and assume they have the right healthcare plan, Parker explains, not realizing “that prescription drug prices can change every year, along with a person’s health conditions, budget, and priorities.”
Considering your needs when shopping for Medicare
“I encourage anyone looking to find the right Medicare plan that fits their budget to use the three Ps method to maximize their healthcare coverage during the annual enrollment period,” Parker says.
This involves making sure to account for the following when choosing a Medicare plan:
- your doctor and other healthcare professionals
- your prescriptions
- your priorities
In addition, he recommends making sure you highlight your lifestyle choices and personal health goals so that you’re well prepared before you begin to search for savings and find the right Medicare coverage for you.
The current rate of inflation in the United States is affecting not just the price of energy, food, and housing but also Medicare costs.
Nearly 90% of U.S. adults are experiencing more stress due to the effects of inflation as the cost of prescription drugs and medical services skyrocket.
While specific deductibles like Medicare Part A will increase in 2023, you can expect healthcare expenses to drop, for the most part, thanks to the Inflation Reduction Act.
In addition to vaccines covered by Medicare Part D available for free beginning next year, you can also expect a $35 cap for your monthly supply of insulin and stricter rules for premium increases.