2020 isn’t far off, and as the new year approaches, we get closer to the launch of changes in Medicare costs. You’ve probably seen commercials on TV or received info in the mail regarding these changes and are in the middle of figuring out how they will affect you and your Medicare. Well, just as in years past, you will see several shifts in pricing for Medicare in 2020. The premiums for Medicare Part A and Medicare Part B will both increase, but so has the Cost Of Living Adjustment, which covers this increase. Also, the 2020 deductibles for both Part A and Part B will increase.
Medicare Premiums vs. Medicare Tax
Before we dive into all the changes in Medicare costs in 2020, we wanted to first address the difference between Medicare premiums and the Medicare tax. We know people sometimes get confused by these terms, but they do not mean the same thing. The premium is the amount you pay for your Original Medicare, Medicare Advantage, or Medigap insurance. Most of the time, it is paid in monthly installments. The Medicare tax is what the federal government imposes on wages earned by all employees and self-employed individuals. In 2019 the tax rate is 2.9%. If you are considered an employee of a company, you split the 2.9% with your employer. Your employer covers 1.45% of it, and you cover the other 1.45% via payroll deductions. If you’re self-employed, then you are responsible for the entire 2.9% yourself. Currently, you are taxed on income up to $132,900. But in 2020, income will be taxed up to $137,700. If your income is very high ($200,000 or more for a single person), you will pay a Medicare tax rate of 3.8%.
Medicare Part A Premium
Medicare Part A is an essential part of Original Medicare. It covers hospitalization costs. If you’re eligible for Medicare, you probably don’t pay a premium for Part A. The cost of the Part A premium depends on your number of work history quarters. If you have fewer than 30 work history quarters and are therefore ineligible for premium-free Medicare Part A, the price will increase from $437 per month in 2019 to $460 in 2020. Furthermore, if you have between 30 and 40 work history quarters, which also makes you ineligible for premium-free Part A, you will pay $253 per month in 2020, up from $240 in 2019.
Finally, if you have 40 or more work history quarters and you are retiring in 2020, you will not pay for Medicare Part A, just as in previous years.
Medicare Part B Premiums
Medicare Part B, which is also part of Original Medicare, covers durable medical equipment, physician services, outpatient hospital services, and several other services, which don’t fall under the coverage of Medicare Part A. Medicare Part B’s standard premium was $135.50 per month in 2019. In 2020 it will increase to $144.30 per month. If you’re in a higher income bracket, you will also have a higher premium for 2020.
Note that if your Cost of Living Adjustment (COLA), provided by Social Security, is insufficient to cover the rise in cost for Part B Premiums, you will only pay the same as the increase in your Social Security benefit. This is instead of also paying for the remainder of the Part B premium. That way, you don’t have to pull money out of your pocket to cover the Part B Premium. This is due to a law called the “Hold Harmless Provision”.
Changes to Deductibles
Unlike Part B, Part A’s deductibles apply to each benefit period lasting a maximum of 60 days, which is the maximum period covered by Part A’s hospital care allotment. The Medicare Part A deductible isn’t calculated yearly like most other non-Medicare plans, which reset on January 1st. Therefore, if you’re in the hospital before and after that date in continuity, Medicare Part A is your best chance to avoid paying two deductibles.
If a person is still hospitalized after the 60 days are over, Medicare Part A enrollees will pay $355 (up from $341) for every extra day spent in the hospital for the next 30 days. After the 90th day, enrollees will pay $710 for every ‘lifetime reserve day’, up from $682 in 2019. When all of these days are exhausted, you will have to cover all of your medical costs. That is unless you have additional coverage in the form of Medicare Supplement insurance or Medicare Advantage insurance. If you’d like to see how Medicare Supplement insurance and Medicare Advantage can save you on Medicare costs, give us a call at (877) 877-5505.
Additionally, Medicare Part A covers the first 20 days of a stay at a skilled nursing facility, but it also has an 80 day coinsurance period afterward. For every day during this period, the coinsurance will be $177.50 per day, up from $170.50 in 2019. Note that you will have to have at least three days of inpatient hospital stay before moving to a skilled facility to be eligible for coverage during the first 20 days.
Finally, the 2020 Medicare deductible for Part A has increased from $1,364 in 2019 to $1,420 in 2020.
The basic 2019 Medicare Part B deductible was $185, but in 2020 it will increase to $197. On top of this, you may also have to pay a surcharge depending on your income. In 2019, this surcharge was applied if you had income higher than $85,000 as a single person or $170,000 as a married couple. This has been adjusted for inflation for 2020. You would have to have a yearly income of $87,000 by yourself or $174,000 with your partner, to pay a surcharge.
These surcharges ranged from $189.60 to $460.50 for 2019, but in 2020 they will range from $202 to $490.50 per month.
The standard Medicare Part D deductible will rise $20 in 2020, from $415 to $435, however some plans may charge less. Also, the Initial Coverage Limit will be raised from $3,820 in 2019 to $4,020 in 2020, resulting in a $200 increase. Furthermore, the Out-Of-Pocket threshold will increase from $5,100 in 2019 to $6,350 in 2020. As in past years, 2020 will also have a donut hole coverage gap, which starts when you reach your Initial Coverage Limit and ends when you reach the Out-Of-Pocket threshold in 2020. There is a 75% discount for all brand-name drugs while you’re in the donut hole. Not only do you get a discount, but the discounted amount also counts towards your Out-Of-Pocket spending. Because of this, you will cross the hole in coverage 75% faster and won’t have to pay as much in Medicare costs!
Medigap plans C and F cover the entirety of the Part B deductible, which was discouraged with the MACRA act. Because of changes in the law, Medigap Plan C, F or the high-deductible Plan F will not be available for new enrollees in 2020, but they will continue to be available for all those who turned 65 prior to January 1, 2020. Also, a new plan will make its debut, Medicare Supplement High Deductible Plan G (HDG), has been added to supplement the removal of Plan F.
Social Security Increase
The Social Security Cost Of Living Adjustment (COLA) is set to rise by 1.6% in 2020, which will provide an additional $32 to $1,503 to beneficiaries, depending on annual income. While in the last two years this has risen by at least two percent. 2020 will break that winning streak, dropping to pre-2015 numbers. Additionally, the COLA increase provides an increase in the maximum retirement benefit, which is $2,861 in 2019 and will be $3,011 in 2020, increasing by $150. The increase only applies to people who retire at full retirement age in 2020. Depending on your situation, this 1.6% increase may mean a difference in the funds you receive.
Hold Harmless Clause
The Medicare Hold Harmless clause keeps the price of Medicare from rising every year by more than the Cost Of Living Adjustment made by Social Security. This ensures that Medicare costs won’t skyrocket and become unaffordable to most citizens. It also comes with certainty for everyone currently on Medicare, ensuring that they will be able to pay their medical insurance next year as well.
For 2020, the Hold Harmless clause protects those who receive the lowest tier of Social Security benefits, equal to $550 per month or less. These beneficiaries would have to pay more than their 1.6% increase in COLA, but they won’t need to take money out of their own pockets due to the coverage by the Hold Harmless clause.
Other changes for 2020
Medicare Plan Finder Tool Update
After a full decade, the Medicare Plan Finder tool was updated in September to prepare for the 2020 enrollment periods. It will now be far easier for retirees to find suitable plans as it includes several improvements. However, officials predict an extended adjustment period simply because the old tool was in use for ten years, and this one is a bit more complicated to operate. For this reason, we recommend contacting a knowledgeable Medicare insurance agency, such as Bobby Brock Insurance, that can walk you through the plans that are available to you and any Medicare costs associated. Fill out our online form to get in contact with us.
Medicare Advantage Premium Changes
Also, the CMS (Centers for Medicare & Medicaid Services) has announced the new Medicare Advantage premium prices for 2020. For 2020, these premiums will be considerably lower than the previous years, dropping down to their 2007 amounts. The premiums for Medicare Advantage plans are set to drop by an incredible 23%, which provides more options when choosing your plan or benefits.
There were 22.2 million Medicare Advantage enrollees in 2019, and this is projected to increase to 24.4 million in 2020, which means it will cover more than a third of all Medicare beneficiaries. Medicare Advantage plans are a very popular choice for many retirees. Now is the time to cash in on these lower premiums! Let us help you find the best insurance companies in your state and a plan that will give you most for your Medicare costs.