Monday, November 29, 2021

2022 Medicare Costs Will Take a Bite Out of Social Security COLA

Beneficiaries should plan to pay more for hospital stays, doctor visits and prescription drugs, but advisors can still help.

Medicare beneficiaries will have to ante up more money in the new year to cover the increases to Medicare Part A, Part B and Part D that were recently announced by the Centers for Medicare & Medicaid Services (CMS). Medicare Open Enrollment for 2022 began on Oct. 15 and concludes on Dec. 7.

“Steep increases in Medicare premiums, deductibles, etc. … will eat into the Social Security increase substantially,” says Michelle Rand, founder and president of Cascade Investment Advisors in Oregon City, Ore.

Medicare Part A

Medicare Part A covers inpatient hospital, skilled nursing facility and inpatient rehabilitation care, as well as limited home healthcare services. Although most beneficiaries don’t pay premiums for Part A coverage, they are responsible for some hospital costs. Beneficiaries admitted to the hospital face a Part A inpatient hospital deductible of $1,556 in 2022, an increase of $72 from $1,484 in 2021. The deductible represents their share of costs for the first 60 days of Medicare-covered inpatient hospital care in a benefit period. Beneficiaries must pay coinsurance of $389 per day for the 61st through 90th days of hospitalization (compared with $371 in 2021).

Beyond 90 days in the hospital, beneficiaries will be hit with coinsurance of $778 per day (compared with $742 in 2021) for each “lifetime reserve day” in the benefit period. Beneficiaries receive up to 60 lifetime reserve days over their lifetime. Many Medicare recipients buy supplemental insurance (Medigap plans) to defray hospital coinsurance and other costs.

In 2022, skilled nursing facility coinsurance will be $194.50 per day, compared with $185.50 per day in 2021.

According to CMS, 99% of Medicare beneficiaries don’t have to pay a Part A premium because they have at least 40 quarters of Medicare-covered employment. Beneficiaries who had at least 30 quarters of employment coverage or were married to someone with at least 30 quarters of coverage may buy into Part A at a reduced monthly rate of $274, a $15 increase from 2021. Some uninsured individuals with less than 30 quarters of coverage, as well as certain individuals with disabilities who’ve exhausted other entitlements, face the full monthly premium of $499 in 2022, a $28 increase from 2021.

Medicare Part B

Costs associated with Medicare Part B (which covers physician services, outpatient hospital services, certain home health services, durable medical equipment, and some other medical and health services not covered by Medicare Part A) will also increase in 2022.

In 2022, the standard monthly premium for enrollees will be $170.10 (compared with $148.50 in 2021) and the annual deductible for all Medicare Part B beneficiaries is $233 ($203 in 2021). Beneficiaries who file individual tax returns with modified adjusted gross income exceeding $91,000 ($182,000-plus for joint filers) pay income-related monthly adjustments on top of the standard monthly premium. These graduated adjustments top out at $408.20 — for a total monthly premium of $578.30 — when MAGI is greater or equal to $500,000 for individual filers or $750,000 for joint-filers.

Medicare Part D

According to an analysis by the Kaiser Family Foundation, 766 Medicare Part D stand-alone prescription drug plans will be offered in 2022, 23% fewer than in 2021. Medicare Part D is provided through private plans approved by the federal government.

The standard deductible is increasing to $480 in 2022, compared with $445 in 2021, according to KFF, and the initial coverage limit is increasing to $4,430 from $4,130 over this same period. The out-of-pocket spending threshold is increasing to $7,070 from $6,550, says KFF.

It’s not too late for advisors to check in with their clients to see if they’re suffering from Medicare angst and to hold a “Medicare Checkup.” Meanwhile, low-income seniors and adults with disabilities may qualify to receive financial assistance from the Medicare Savings Programs (MSPs).

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