- Medicare premiums and deductibles have increased across the various plans.
- The “donut hole” in Medicare Part D was eliminated in 2020.
- Changes have been made to Medicare coverage to respond to COVID-19.
Sifting through the annual changes to Medicare programs and costs is not easy. Most premiums and deductibles will cost you more this year than last, and new enrollees won’t have access to some older plans.
On the plus side, federal policymakers have adjusted coverage to allow comprehensive, affordable coverage when it comes to the 2019 novel coronavirus and COVID-19 the illness it causes.
Read on for more information about your Medicare changes for 2021.
Healthcare costs rise more each year, and to make up these costs, premiums and deductibles for Medicare increase.
Medicare now has nearly 60 million members, and it’s up to the Centers for Medicare & Medicaid (CMS), a division of the U.S. Department of Health and Human Services, to keep the needs of enrollees and the cost of the program in check as laid out in the Social Security Act.
The following sections explain the considerations that guide changes to Medicare programs and costs.
Trends in healthcare transformation
Examples of these changing trends in healthcare include things like the transition from a “volume-based” to “value-based healthcare system.” This means changing things like the way provider reimbursement is evaluated.
Historically, healthcare providers have been paid based on the number of times they saw you, and whether they improved your health or not, the payment was the same. Under the new system, physicians are rewarded based on how much healthier they make you, not how often they saw you. The goal is to provide better, more efficient healthcare at a lower cost.
Federal laws like MACRA
Healthcare laws influence Medicare costs and the Medicare parts and plans that are offered to you. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) changed the way doctors are paid and made it possible to charge you more for services that are often overused.
Specifically, this law eliminated coverage of Medicare Part B deductibles in certain Medicare supplement plans (Medigap Plan C and Plan F). These plans won’t go away if you have them already, but they were eliminated for new Medicare enrollees as of January 1, 2020.
Price increases across healthcare, such as prescription drug price hikes, will influence the cost of Medicare parts and plans, deductibles, coinsurances, and out-of-pocket limits.
Medicare Part A is the part of Medicare that pays for hospitalization, nursing home, and some home healthcare costs.
Most people do not pay a premium for Medicare Part A because they prepaid for their coverage throughout their working years.
For those who do pay, premium costs have gone up for 2021. People who worked for 30 to 39 quarters in their lifetime will pay $259 per month, up $7 per month from 2020. People who worked less than 30 quarters in their lifetime will pay $471 per month, up $13 per month from 2020.
Medicare Part A also has a deductible that increases each year. This deductible covers an individual benefit period, which lasts 60 days from the first day of hospital or care facility admission.
The deductible for each benefit period in 2021 is $1,484 — $76 more than in 2020.
When care is required longer than 60 days, a coinsurance cost applies.
For hospitalization, this means Medicare Part A will charge participants a coinsurance of $371 per day for days 61 through 90 — up from $352 in 2020. Beyond 90 days, you must pay a rate of $742 per day for lifetime reserve days — up from $704 in 2020.
A new benefit period begins once you have been out of hospital or nursing home care for 60 consecutive days. At that point, deductible and coinsurance rates are reset.
Medicare Part B covers physician fees, outpatient services, some home health services, medical equipment, and some medications.
The increase in premiums and deductibles is lower in 2021 than they were in 2020. These increases are primarily the result of increased costs for medications administered by physicians, according to CMS.
Most people with Medicare Part B pay a premium for this plan, and the base cost in 2021 is $148.50 per month for individuals who make less than $88,000 per year or couples who make less than $176,000 per year. Premium costs increase incrementally based on income.
The deductible are also charged under Part B, and increased $5 from 2020 to a total of $203 per year for 2021.
Medicare Part C costs are variable and are set by the private plan carrier you choose.
Medicare Part C, or Medicare Advantage, combines the elements of Medicare Part A and Part B, plus additional services not covered under those two plans.
Since costs for these plans are set by private companies, not much changed this year at the federal level. However, there was one major change that goes into affect this year for people who have end stage renal disease (ESRD).
Due to a law passed by Congress, people with ESRD are eligible to enroll in a broader range of Medicare Advantage plans in 2021. Before this law, most companies selling Medicare Advantage plans would not let you enroll or would limit you to a Chronic Condition SNP (C-SNP) if you had a diagnosis of ESRD.
Medicare Part D is known as the prescription drug plan for Medicare.
Like Medicare Part C. Part D plan costs vary by provider, and premium costs are adjusted based on your income.
One big change in 2020 was the closing of the “donut hole.” The donut hole was a gap in the plan’s prescription drug coverage that occurred once the plan had paid out a certain amount for prescription medications for the year.
In 2021, there is a Part D deductible of $445, but this may vary depending on the plan you choose. You will pay 25 percent of the cost for your medications until you’ve reached the annual out-of-pocket maximum, which is $6,550 for 2021.
After you’ve paid $6,550 out of pocket, you have entered the catastrophic benefit period, and you may pay a copay of up to $3.70 for generic medications and up to $9.20 for brand-name drugs or a 5 percent coinsurance fee.
Medicare supplement, or Medigap, plans are Medicare plans that help you pay for a portion of your Medicare costs. These supplements can help offset the costs of premiums and deductibles for your Medicare coverage.
Plans are sold by private companies, so rates vary. Medicare offers an online tool to find and compare available plans in your area and their costs.
Starting on January 1, 2020, new Medicare enrollees were not allowed to sign up for Medigap Plan C or Plan F. These supplement plans covered all of the Medicare Part B premium costs for those enrolled.
The goal of this change was to try encourage more judicious use of healthcare services covered under these plans by forcing enrollees to pay more out-of-pocket for them, as outline in MACRA.
These plans did not disappear completely, and people who had enrolled in either plan and who were eligible for Medicare before January 1, 2020, can continue using these plans. However, no new enrollees can sign up for Part C or F because the 2015 law called MACRA outlawed Medigap policies that paid Medicare Part B deductibles.
However, there is Medicare Plan G for people who want a high-deductible plan. In 2021, under Plan G, Medicare covers its share of costs, and then you pay out-of-pocket until you have reached a $2,370 deductible. At that point, Plan G will pay for the remainder of costs.
Another change coming to Medicare in 2021 is an update to the income brackets. Income brackets are specific ranges of income that determine things like your tax rate or what you may be required to pay for Medicare.
Income brackets were introduced in 2007. The bottom income bracket was set at $85,000 for individuals and $170,000 for couples, and it increased in increments. That threshold was increased for inflation in 2021 to $88,000 for an individual or $176,000 for couples.
Medicare changes to fight 2019 novel coronavirus (COVID-19)
The changes ensure that costs to treat the new coronavirus or the disease it causes, COVID-19, are covered under these plans. Coverage includes:
- testing for coronavirus with no out-of-pocket costs
- all medically necessary hospitalizations related to coronavirus
- a vaccine for coronavirus, should one become available (covered by all Medicare Part D plans)
- Medicare expansion of telehealth services and virtual visits to increase access and meet patient needs due to the Public Health Emergency created by COVID-19
- waiver of the requirement that patients have a 3-day hospital stay before entering a nursing home to clear hospital resources for more critically ill patients
- While Medicare premiums and deductibles have increased across the board in 2021, there are other ways you can save money.
- As the nation continues to battle the public health emergency caused by COVID-19, you won’t have to worry about additional costs for testing, treatment, or vaccinations as they become available.
This article was updated on November 20, 2020, to reflect 2021 Medicare information.
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