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Changes for 2023 include premium and deductible increases for Part A, lower rates for Part B, and better Part D coverage due to the Inflation Reduction Act
Reviewed by our health policy panel.
Avoid these costly mistakes during Medicare open enrollment
Today medicareresources.org released tips to help consumers avoid costly mistakes while evaluating and selecting coverage during Medicare open enrollment.
Will the Inflation Reduction Act improve Medicare coverage of diabetes treatment?
The Inflation Reduction Act – passed in August 2022 – will decrease how much Medicare enrollees have to spend on diabetes care.
Will Medicare cover the cost of at-home COVID tests?
Medicare began covering the cost of at-home COVID tests starting on April 4, 2022.
How will my Medicare prescription drug costs in 2023 compare with 2022?
Q: How will Medicare prescription drug costs change for 2023? A: There are several changes for 2023, including free vaccines under Part D, a $35 cap on monthly insulin costs, and changes to the Part D deductible and coverage thresholds.
Is Original Medicare coverage enough?
If you shun private coverage, can you get by on Original Medicare without purchasing supplemental coverage (Medigap and Part D prescription coverage) or using a Medicare Advantage plan?
A: There will be several changes for Medicare enrollees in 2023. Some of them apply to Medicare Advantage and Medicare Part D, which are the plans that beneficiaries can change during the annual fall enrollment period that runs from October 15 to December 7. (Here’s our overview of everything you need to know about the annual enrollment period.)
The standard premium for Medicare Part B is $170.10/month in 2022, but it’s decreasing to $164.90/month in 2023. This is the first year-over-year decrease since 2012. Medicare Part B spending was lower than expected in 2022, leaving a surplus that is being used to decrease premiums for 2023.
This is partly due to Medicare’s lower-than-expected spending on Aduhelm, the new Alzheimer’s drug that drove a significant portion of the Part B rate increase in 2022. (The standard Part B premium increased by nearly $22/month in 2022 — it had been $148.50/month in 2021 — which was the largest dollar increase in the program’s history.)
For 2023, the Social Security COLA is 8.7%, which is the largest it’s been in decades. And unlike 2022, when a chunk of seniors’ COLA had to be used to cover the additional Part B premiums (Part B premiums are deducted from Social Security checks), the Part B premium is decreasing in 2023. So the COLA will be fully available for retirees to use to cover other living expenses, which have increased sharply in 2022.
(If a Social Security recipient’s COLA isn’t enough to cover the full premium increase for Part B, that person’s Part B premium can only increase by the amount of the COLA. That’s because Part B premiums are withheld from Social Security checks, and net checks can’t decline from one year to the next. That was not an issue in 2022, however, due to the size of the COLA, and will not be an issue in 2023 due to the large COLA and lack of a Part B rate increase.)
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Some enrollees have supplemental coverage that pays their Part B deductible. This includes Medicaid, employer-sponsored plans, and Medigap plans C and F. But since the beginning of 2020, Medigap plans C and F have no longer been available to newly-eligible enrollees (people can keep them if they already have them, and people who were already eligible for Medicare prior to 2020 can continue to purchase them). The ban on the sale of Medigap plans that cover the Part B deductible for new enrollees was part of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). It’s an effort to curb utilization by ensuring that enrollees incur some out-of-pocket costs when they receive medical care.
Many Medicare Advantage plans have low copays and deductibles that don’t necessarily increase in lockstep with the Part B deductible, so their benefits designs have had different fluctuations over the last few years. (Medicare Advantage enrollees pay the Part B premium plus the Advantage plan premium if the plan has a separate premium — many do not, so the enrollees just pay the Part B premium. Medicare Advantage plans wrap Part A, Part B, usually Part D, and various supplemental coverage together into one plan, with out-of-pocket costs that are different from Original Medicare.)
Medicare Part A covers hospitalization costs. Part A has out-of-pocket costs when enrollees need hospital care, although most enrollees do not pay a premium for Part A. But you’ll have to pay a premium for Part A if you don’t have 40 quarters of work history (or a spouse with 40 quarters of work history).
Roughly 1% of Medicare Part A enrollees pay premiums; the rest get it for free based on their work history or a spouse’s work history. Part A premiums have trended upwards over time and they’re increasing again for 2023.
For 2023, the Part A premium for people with 30+ (but less than 40) quarters of work history will be $278/month, up from $274/month in 2022. And for people with fewer than 30 quarters of work history, the premium for Part A will be $506/month in 2023, up from $499/month in 2022.
Part A has a deductible that applies to each benefit period (rather than a calendar year deductible like Part B or private insurance plans). The deductible generally increases each year. It will be $1,600 in 2023, up from $1,556 in 2022. The deductible applies to all Part A enrollees, although many enrollees have supplemental coverage that pays all or part of the Part A deductible.
The Part A deductible covers the enrollee’s first 60 inpatient days during a benefit period. If the person needs additional inpatient coverage during that same benefit period, there’s a daily coinsurance charge. For 2023, it will be $400 per day for the 61st through 90th day of inpatient care (up from $389 per day in 2022). The coinsurance for lifetime reserve days is $800 per day in 2022, up from $778 per day in 2022.
As a result of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), Medigap plans C and F (including the high-deductible Plan F) are no longer available for purchase by people who become newly-eligible for Medicare on or after January 1, 2020. People who became Medicare-eligible prior to 2020 can keep Plan C or F if they already have it, or apply for those plans at a later date, including for 2023 coverage.
Medigap Plans C and F cover the Part B deductible ($226 in 2023) in full. But other Medigap plans require enrollees to pay the Part B deductible themselves. The idea behind the change is to discourage overutilization of services by ensuring that enrollees have to pay at least something when they receive outpatient care, as opposed to having all costs covered by a combination of Medicare Part B and a Medigap plan.
Because the high-deductible Plan F was discontinued for newly-eligible enrollees as of 2020, there is a high-deductible Plan G available instead.
Yes. The threshold for high-income surcharges (and each of the income brackets) is increasing for 2023, although the premiums that people pay for Part B are decreasing, and that includes people who pay the high-income surcharge.
Medicare beneficiaries with high incomes pay more for Part B and Part D. But what exactly does “high income” mean? The high-income brackets were introduced in 2007 for Part B and in 2011 for Part D, and for several years they started at an income of $85,000 ($170,000 for a married couple).
But the income brackets began to be adjusted for inflation as of 2020. For 2023, the threshold where the surcharge starts to be added is increasing again, to $97,000 for a single person and $194,000 for a married couple, up from $91,000 and $184,000, respectively, in 2022. The significant increase for 2023 is due to the fairly high inflation we’ve seen in 2022. (Note that the surcharge in 2023 will be based on income tax returns from 2021, since those are the most recent tax returns on file when 2023 begins; there’s an appeals process you can use if your income has changed since then).
For 2023, the Part B premium for high-income beneficiaries ranges from $230.80/month to $560.50/month, depending on income (this is a decrease from 2022, when the premiums for high-income beneficiaries ranged from $238.10/month to $578.30/month in 2022).
As part of the Medicare payment solution that Congress enacted in 2015 to solve the “doc fix” problem, new income brackets were created to determine Part B premiums for high-income Medicare enrollees. These new brackets took effect in 2018, bumping some high-income enrollees into higher premium brackets.
And starting in 2019, a new income bracket was added on the high end, further increasing Part B premiums for enrollees with very high incomes. Rather than lumping everyone with income above $160,000 ($320,000 for a married couple) into one bracket at the top of the scale, there’s now a bracket for enrollees with an income of $500,000 or more ($750,000 or more for a married couple).
People in this category will pay $560.30/month for Part B in 2023. The income level for that top bracket — income of $500,000+ for a single individual or $750,000 for a couple — has remained unchanged since 2020. But the thresholds for each of the other brackets has increased each year (starting with the lowest bracket increasing from $85,000 to $87,000 in 2020, and so on; a similar adjustment has applied at each level except the highest one).
According to CMS, the average Medicare Advantage (Medicare Part C) premiums is expected to be about $18/month in 2023 (in addition to the cost of Part B), which is down from $19.52/month in 2022 and $23/month in 2020. Average Advantage premiums have been declining for the last several years.
(Note that Medicare Advantage premiums are in addition to Part B premiums. People who enroll in Medicare Advantage pay their Part B premium and whatever the premium is for their Medicare Advantage plan, and the private insurer wraps all of the coverage into one plan.)
The average premiums described above account for all Medicare Advantage plans, including those that don’t have integrated Part D coverage. And the overall average is driven down due to the fact that the majority of Advantage enrollees actually have no premiums other than the cost of Part B (ie, they’re in “zero premium” Advantage plans). If we only consider the Advantage premiums for plans that do include Part D and that do have a premium in addition to the cost of Part B, the average premium is quite a bit higher ($58/month, for people with Advantage plans that integrate Part D and have a monthly premium).
More than 29 million people had Medicare Advantage plans in 2022. Enrollment in these plans has been steadily growing for more than 15 years, and CMS expects that to continue in 2023, with enrollment projected to reach 31.8 million people. The total number of Medicare beneficiaries has been steadily growing as well, but the growth in Medicare Advantage enrollment has far outpaced overall Medicare enrollment growth. In 2004, just 13% of Medicare beneficiaries had Medicare Advantage plans. That had grown to more than 46% by 2022.
Historically, Medicare coverage for kidney transplant recipients has only lasted for 36 months after the transplant. But as of 2023, that’s no longer the case. After 36 months, kidney transplant recipients will be able to continue to have limited Medicare Part B coverage for immunosuppressive drugs. This won’t be full Medicare Part B, but it will cover the medications that transplant recipients must take for the rest of their lives in order to prevent their bodies from rejecting the transplanted kidney.
As of 2023, the cost for Part B that only covers immunosuppressive drugs is $97.10/month (it’s higher for people with income above $97,000 for a single individual, or $194,000 for a couple). Once the person turns 65, or becomes eligible for Medicare based on a disability, they can transition back to full Medicare coverage.
Under longstanding rules, Medicare Advantage plans used to be unavailable to people with end-stage renal disease (ESRD) unless there was an ESRD Special Needs Plan available in their area. But starting in 2021, Medicare Advantage plans are guaranteed issue for all Medicare beneficiaries, including those with ESRD. This is a result of the 21st Century Cures Act, which now gives people with ESRD access to any Medicare Advantage plan in their area.
Many people with ESRD will find that Original Medicare plus a Medigap plan and Medicare Part D plan is still the most economical option overall, in terms of the coverage provided. But in some states, people under 65 cannot enroll in guaranteed-issue Medigap plans, or can do so only with exorbitantly high premiums. And some of the states that do protect access to Medigap for most beneficiaries under 65 do not extend those protections to people with ESRD. Without supplemental coverage, there is no cap on out-of-pocket costs under Original Medicare.
Medicare Advantage plans do have a cap on out-of-pocket costs, as described below. So for ESRD beneficiaries who cannot obtain an affordable Medigap plan, a Medicare Advantage plan could be a viable solution, as long as the person’s doctors and hospitals are in-network with the plan.
Medicare Advantage plans are required to cap enrollees’ out-of-pocket costs for Part A and Part B services (unlike Original Medicare, which does not have a cap on out-of-pocket costs). The cap does not include the cost of prescription drugs, since those are covered under Medicare Part D (even when it’s integrated with a Medicare Advantage plan).
For several years, the cap was $6,700, although most plans have had out-of-pocket caps below that level. For 2021 and 2022, the maximum out-of-pocket limit for Medicare Advantage plans increased to $7,550 (plus out-of-pocket costs for prescription drugs). For 2023, the cap is increasing to $8,300. But most Advantage plans will continue to have out-of-pocket caps below the government’s maximum.
Average Part D premiums are projected to be $31.50/month in 2023, down from $32.08 in 2022. But as is always the case, there will be numerous options available, with a wide range of premiums.
And the out-of-pocket threshold (where catastrophic coverage begins) will increase to $7,400 in 2023, up from $7,050 in 2022 (note that this is a combination of drug manufacturer discounts and the enrollee’s costs; actual out-of-pocket costs for the enrollee will be around $3,100 when the catastrophic coverage level is reached).
The copay amounts for people who reach the catastrophic coverage level in 2021 will increase slightly, to $4.15 for generics and $10.35 for brand-name drugs. Beneficiaries with higher-cost drugs will continue to pay 5% of the cost during the catastrophic coverage phase (it’s the greater of the copay or the 5%). But cost-sharing in the catastrophic coverage phase will cease altogether as of 2024, thanks to the Inflation Reduction Act.
The Inflation Reduction Act will also start to benefit Medicare Part D enrollees right away in 2023. Recommended vaccines covered under Part D will no longer have cost-sharing (ie, they’ll be free). And all Part D plans will have to provide all of their covered insulin products with copays of no more than $35/month (this essentially extends the existing optional Senior Savings Model to all Part D plans, including Medicare Advantage plans with integrated Part D coverage).
The Affordable Care Act “closed” the donut hole in Medicare Part D, so there is no longer a “hole” for brand-name or generic drugs: Enrollees in standard Part D plans pay 25% of the cost (after meeting their deductible) until they reach the catastrophic coverage threshold. Prior to 2010, enrollees paid their deductible, then 25% of the costs until they reached the donut hole, then they were responsible for 100% of the costs until they reached the catastrophic coverage threshold.
That amount gradually declined over the next several years, and the donut hole closed one year early — in 2019, instead of 2020 — for brand-name drugs.
The donut hole is still relevant, however, in terms of how drug costs are counted towards reaching the catastrophic coverage threshold, and in terms of who covers the costs of the drugs (ie, the drug manufacturer or the enrollee’s Part D plan). Here’s more about how that all works.
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.