Medicare Part B costs: key takeaways
- Standard Part B premiums are $148.50/month in 2021.
- The Social Security COLA is large enough to cover the full cost of the Part B increase for almost all enrollees.
- The high-income threshold (where premiums increase based on income) grew to $88,000 for a single person for 2021.
- The Part B deductible increased to $203 for 2021.
Q: How much does Medicare Part B cost the insured?
A: In 2020, most people earning no more than $87,000 ($174,000 for a married couple; note that these amounts are higher than they were prior to 2020) pay $144.60/month for Part B. And in most cases, Part B premiums are just deducted from beneficiaries’ Social Security checks.
For 2021, most beneficiaries will pay $148.50/month for their Part B coverage. The premium increase from 2020 to 2021 was smaller than initially projected, thanks to a short-term government spending bill that was enacted in the fall of 2020, and that included a provision to cap the increase in the Part B premium for 2021.
Part B premium can be limited by Social Security COLA, but that wasn’t an issue for most beneficiaries in 2020 or 2021
In 2021, most enrollees will be paying $148.50/month for their Part B coverage, which is the standard amount. Most enrollees were also paying the standard amount in 2020 ($144.60/month) and in 2019 ($135.50/month). But that’s in contrast with 2017 and 2018, when most enrollees paid a premium that was lower than the standard premium. The standard premium in 2018 was actually $134/month, but the cost of living adjustment for Social Security wasn’t quite large enough to cover all of the increase from 2017’s premium for most enrollees. That’s why most people paid about $130/month.
The standard Part B premium increased by about $9/month in 2020. But the 1.6 percent Social Security COLA for 2020 increased the average beneficiary’s Social Security benefit by $24/month. Since the COLA for most beneficiaries exceeded the premium increase for Part B, most Part B enrollees have been paying the standard premium in 2020. And for 2021, the 1.3 percent COLA is adequate to cover the increase to the new standard premium ($148.50/month) for virtually all enrollees. [If the COLA wasn’t sufficient to cover the Part B increase, the average enrollee would be charged a lower-than-standard premium for Part B in order to avoid a year-over-year decrease in their net Social Security check after the Part B premium is subtracted each month.]
Higher premiums for enrollees with high-income (threshold indexed in 2020, and has increased again for 2021)
For the first time, the threshold for what counts as “high income” was adjusted for inflation as of 2020, increasing it to $87,000 for a single individual and $174,000 for a couple. And it’s increasing again for 2021. Harry Sit, of The Finance Buff, explains how the inflation indexing works here.
Indexing the high-income threshold: The math
The indexing is based on the percentage by which the average of the Consumer Price Index for Urban consumers (CPI-U) for the 12-month period ending in the most recent August exceeds the average of the 12-month period that preceded that. So for 2021, we look at how the average CPI-U from September 2019-August 2020 exceeded the average CPI-I from September 2018-August 2019.
On this page, you can pull up the data for CPI-U (select the first box under “Price Indexes”) and manually calculate how the average CPI-U has changed. You’ll add up all the numbers from September 2019 through August 2020 (don’t include the “Half1” and “Half2” numbers), and divide by 12 to get the average (in this case, 257.72). Then you’ll do the same thing for September 2018 through August 2019 (you’ll get an average of 254.016). The difference between those two numbers is 3.705, which represents a 1.46 percent increase from the 254.016 average CPI-U for September 2018 to August 2019. So as Harry explains here (for the 2020 increase, but the process is the same for 2021 albeit with different numbers), we increase 87,000 by 1.46 percent — which results in 88,270 — and then round to the nearest $1,000. That gives us an income threshold of $88,000, which is the lower bound of “high-income” as of 2021.
For people with income above $87,000 ($174,000 for a couple) in 2020, Part B premiums for 2020 ranged from $202.40/month to $491.60/month.
As explained by the math above, the high-income threshold has increased to $88,000 for a single individual and $176,000 for a couple in 2021. The 2021 Part B premiums for people with income above those thresholds range from $207.90/month to $504.90/month.
2021 premium surcharge is based on 2019 tax return; you can appeal it if your income has changed
The government determines whether you have to pay an income-related premium surcharge based on your income tax return from two years ago, since that is the most recent tax return they have on file at the start of the plan year. [2019 tax returns were filed in 2020, so those are the most current returns available when income-related premium adjustments are determined for 2021.]
But if a life-change event has subsequently reduced your income, there’s an appeals process you can use. In the appeal, you can request that the income-related premium adjustment be changed or eliminated without having to wait for it to reflect on a future tax return.
Part B deductible also increased for 2021
Medicare B also has a deductible, which has increased to $203 in 2021, up from $198 in 2020. After the deductible is met, the enrollee is generally responsible for 20 percent of the Medicare-approved cost for Part B services. But supplemental coverage (from an employer-sponsored plan, Medigap, or Medicaid) often covers these coinsurance charges.
For people who became eligible for Medicare before the start of 2020, there are Medigap plans available (Plans C and F) that cover the Part B deductible, in addition to coinsurance charges. But those plans are no longer available for Medicare beneficiaries who became eligible for Medicare after the end of 2019.
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.
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