Healthcare costs can be a big one of the costs that retirees have to deal with. In fact, most seniors are surprised by how high their Medicare costs are. Even Medicare Part D, which pays for prescriptions, is part of this.
The Centers for Medicare & Medicaid Services recently said that seniors’ prescription drug coverage premiums could go down in 2023. But that drop isn’t much to get excited about, and higher deductibles could easily cancel it out.
Lower Premium Expenses Will Not Go A Long Way
CMS releases 2023 Medicare Advantage and Part D Advance Notice >"CMS is proposing an effective growth rate of 4.75% and an overall expected average change in revenue of 7.98%, following a 4.08% revenue increase planned for 2022" https://t.co/hRlPyxL3Oj
— Sandeep Pulim (@SPulim) February 4, 2022
Many seniors got most of their money from Social Security, which was a fixed income. And many retirees struggle to pay for health care. In 2023, Medicare Part D premiums for seniors could go down by $0.58. This would be a break for them.
Yes, the average monthly premium for Part D is expected to go down from $32.08 to $31.50. So, all things considered, seniors may end up with a few extra dollars at the end of the year.
…Or won’t they? The premiums for Part D will go down, but the maximum deductible is expected to go up by $25 from $480 to $505 the following year. Not all seniors will be affected by this change since some Part D plans don’t have deductibles. But people with the highest deductibles could lose their savings on premiums.
Also, as usual, people who make more money will have to pay more for Part D because of IRMAAs, or income-related monthly adjustment amounts. These rules are also true for Part B premiums.
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Prepare For Medical Costs Ahead Of Time
When seniors find out how much Medicare health care costs, it often comes as a surprise. But a health savings account is a good way to avoid a financial shock in the future (HSA).
First draft of 2023 Medicare Advantage notice looks friendly for insurers. Rates will rise by 4.5% on average: https://t.co/UaPrAS31Yi
That would cost Medicare an extra $17.2 billion, and that's before you get into the wild risk adjustment games. https://t.co/b5e2i28uSV
— Bob Herman (@bobjherman) February 2, 2022
The great thing about HSAs is that the money in them doesn’t run out. This means that workers can put money into them over the years and use that money in retirement when it’s likely to be needed the most. When you take money out of your HSA, you don’t have to pay taxes on it as long as you use it to pay for qualified medical expenses. The costs listed above for Part D fall under this category.
Another great thing about HSAs is that when the account holder turns 65, the account changes into a traditional retirement savings plan. Withdrawals used for non-medical expenses are taxed but not punished (prior to age 65, a 20 percent penalty for nonmedical withdrawals applies). That gives older people a lot of freedom.
Medicare Reforms Are Forthcoming
While it’s technically nice to see that seniors may be getting a break on their Medicare Part D premiums, the reality is that a $0.58 drop isn’t exactly much to write home about. Meanwhile, enrollees are still waiting to see what changes come down the pike with regard to Medicare Part B.
Last year, Part B premiums rose substantially, thereby eating into seniors’ Social Security raise. It won’t be surprising to see a large Part B premium hike this year to follow.