The Centers for Medicare & Medicaid Services (CMS) has released the premium and deductible increases for 2021. We are going to provide a rundown here, but before we get there, we will explain the Medicare eligibility parameters.
Retirement Credits
A lot of people think that you automatically qualify for Medicare when you reach the age of 65, but this is not the case. You gain eligibility through the accrual of retirement credits, and you accumulate them when you pay payroll or self-employment taxes.
The vast majority of seniors do become eligible because the requirements are modest, and you can qualify on your spouse’s work record if necessary.
In 2020, taxpayers have been earning one retirement credit for every $1410 that they earn. Next year, this figure is going up to $1470 per credit.
The maximum accrual is four credits in a calendar year, and you become eligible after you have 40 credits. This system also applies to Social Security eligibility.
Four Distinct Parts
There are four distinct parts to the Medicare program. Part A is the hospitalization piece, and Part B pays 80 percent of covered treatments that are provided by physicians and other health care providers. You have to pay the other 20 percent out of your own pocket.
Part C allows you to use your benefit to purchase insurance from a private insurer that combines the respective parts. These are called Medicare Advantage Plans, and they also cover some of the gaps in the Medicare coverage.
Medicare Part D is the prescription drug element, and there are many different plans offered by private insurers that have relationships with the Medicare program.
Part A Deductibles and Coinsurance
There is no monthly premium that you have to pay to receive Part A coverage, but there is a deductible per benefit. It is $1408 this year, and when the new year rolls around, it will go up to $1484.
This deductible will cover your out-of-pocket expenses for days one through 60, but there is a coinsurance requirement for subsequent days. The coinsurance is $352 a day in 2020, and it will rise to $371 next year.
Those rates are for days 61 through 90, and after that, you would be using some of your 60 lifetime reserve days. If you tap into that bucket, you are looking at a daily coinsurance payment of $742 a day in 2021, which is a $38 increase.
Part B Premiums and Deductible
As we have stated, you have to pay 20 percent of Part B covered expenses yourself, and there is also a monthly premium for this coverage. The exact amount that you pay is based on your taxable income.
People that are claiming $88,000 a year or less have been paying a standard monthly premium of $144.60 this year. Next year, there will be a very modest increase of $3.90 per month.
It would have been higher, but a provision contained within the Continuing Appropriations Act, 2021 and Other Extensions Act (H.R. 8337) placed a ceiling on the increase. This was done as a response to the economic impact of the novel coronavirus pandemic.
We should point out the fact that a Medicare beneficiary is “held harmless” if the annual Social Security cost-of-living adjustment is less than the Part B increase. The benefit cannot go down under these circumstances.
There will be a 1.3 percent COLA for 2021, and this will exceed the Part B increase.
The deductible for Part B coverage is going up to $203, which is five dollars more than the deductible this year.
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