Medicare Part B: Key takeaways
- Medicare Part B coverage pays for a broad range of medically necessary services not covered by Part A’s inpatient coverage (including some services that are received while a person is hospitalized).
- Part B also covers preventive services, including diagnostic tests and a host of screenings.
- For 2020, the Part B premium is $144.60/month for most enrollees.
- Enrollees who receive treatment during the year must also pay a Part B deductible, which is $198 in 2020.
- Failing to enroll in Medicare Part B during your open enrollment could raise your Part B premium later on.
- If you have health insurance through your employer, or through your spouse’s employer, you may want to delay enrollment in Part B.
- You can skip Part B altogether, but it’s a risky decision.
What is Medicare Part B?
Medicare Part B picks up – to a large extent – where Medicare Part A leaves off. Part B coverage pays for a broad range of medically necessary services that aren’t picked up by inpatient coverage – even though they might be received while a person is hospitalized – including ambulance services, certain surgical procedures, dialysis, mental health care, physical therapy, transplants, chemotherapy and radiation, urgently needed care and more.
In addition, Part B covers diagnostic tests (such as MRIs, CT scans, EKGs and x-rays) and a host of preventive medical services, such as pap tests, HIV screening, glaucoma tests, hearing tests, diabetes screening and colorectal cancer screenings. Part B also pays the costs of durable medical equipment such as wheelchairs, hospital beds and oxygen equipment.
Is there a premium for Part B?
Yes, and it tends to increase from year to year. For most enrollees, the Part B premium is $144.60/month in 2020. Medicare Part B premiums can be covered by Medicaid if the beneficiary is eligible for both programs. And high-income enrollees pay more than the standard premiums for Part B.
“Hold harmless” provision limits Part B premium increases when Social Security COLA is small
Medicare Part B premiums for most enrollees are deducted from their Social Security checks. But there’s a “hold harmless” rule that prevents net Social Security checks from declining from one year to the next, unless the person has an income of $87,000 or more. So if the Part B premium increases by more than an enrollee’s Social Security cost of living adjustment (COLA), the person’s Part B premium will be adjusted, and will end up being less than the standard amount. This is explained in more detail here. For most enrollees, the COLA for 2020 was more than sufficient to cover the Part B increase. So most enrollees are paying $144.60/month for Part B in 2020.
Small COLA in 2017 meant most enrollees paid less than the standard Part B premium
The Part B premium remained steady (for most enrollees) at $104.90 from 2013 through 2016. It increased in 2017, but the Social Security COLA was just 0.3 percent for 2017. So Part B premium increases for 2017 were very small for most enrollees, as they were limited to the amount of the COLA. As a result, most enrollees paid an average of $109/month in Part B premiums in 2017, even though the standard premium was $134/month (the exact amount that beneficiaries paid in premiums varied depending on the dollar amount of their Social Security COLA).
People who were new to Medicare for 2016 (but who were protected for 2017 by the provision that prevents net Social Security checks from declining) were paying $121.80/month in 2016. Their premium increase for 2017 averaged about 4 percent, since it was limited by the COLA that applied to their Social Security checks.
But standard premiums in 2017 were $134/month for people who were new to Medicare, and for people who pay their Part B premium directly, rather than having it withheld from their Social Security check (either because they paid into a different retirement system in lieu of Social Security, or because they had not yet elected to take Social Security). This amounted to about 30 percent of Part B enrollees, although that includes low-income enrollees for whom state Medicaid programs pay the Part B premiums.
In 2018, most enrollees were still paying slightly less than the standard Part B premium
For 2018, the standard premium remained at $134/month for Part B coverage. The COLA was larger for 2018 than it had been the previous two years, but still not quite large enough to bring everyone’s premiums up to $134/month. So the people who were protected from rate hikes that exceed the amount of their Social Security COLA paid an average of $130/month in Part B premiums in 2018 (up from an average of $109/month in 2017, but still lower than the standard premium).
Most enrollees were paying the standard Part B premium by 2019
For 2019, the COLA was more than adequate to cover the increase in the Part B premiums for most enrollees. But CMS estimated that about 3.5 percent of Medicare beneficiaries were still paying a lower amount in 2019, as their Social Security COLAs weren’t large enough to cover the full increase.
For 2020, the COLA added an average of $24/month to Social Security checks, and the Part B premium increase was only about $9/month (for people who were already paying the standard premium in 2019, which was nearly everyone). So the COLA was more than adequate to cover the Part B premium increase, and nearly all enrollees are paying the standard premium in 2020.
Higher Part B premiums for enrollees with income above $87,000
Medicare Part B enrollees with income above $87,000 ($174,000 for a married couple) pay higher premiums than the rest of the Medicare population (this threshold was $85,000/$170,000 prior to 2020, but it was adjusted for inflation starting in 2020). The 2020 Part B premiums for high-income beneficiaries range from $202.40/month to $491.60/month.
This income-related monthly adjustment amount (IRMAA) is based on your income tax return from two years ago. That’s the most recent tax return they have on file at the start of the plan year (eg. when the 2020 plan year was starting, the most recent tax returns on file were for 2018, so 2018 income was used to determine IRMAAs for 2020). But if a life-change event has reduced your income since then, there’s an appeals process available. You can use it to request that the income-related premium adjustment be changed or eliminated without having to wait for it to reflect on a future tax return.
High-income brackets changed in 2018; additional bracket added in 2019
The income levels for the various brackets changed in 2018, which means that people with unchanged income might have found themselves in a higher Part B premium bracket in 2018, and the adjustment resulted in more enrollees paying the highest premiums. The bracket changes only affected Medicare beneficiaries with income above $107,000 ($214,000 for a married couple), but the premium increases were substantial for people who were bumped into a higher bracket as a result of the changes.
In 2018, the highest income bracket was $160,000 and up ($320,000 and up for a married couple). But a new bracket was created as of 2019 for the highest-income Medicare Part B (and D) enrollees. Those with income above $500,000 ($750,000 for a married couple) pay $491.60/month for their Part B coverage in 2020 (versus $462.70/month for people in what was previously the highest income bracket, but which is now the second-highest bracket).
And as noted above, the lower threshold for IRMAA calculations are indexed for inflation starting in 2020, with the income threshold now set at $87,000 ($174,000 for a married couple). So a person earning $86,000 is no longer subject to the IRMAA surcharge on their Part B and Part D premiums (keep in mind that this is based on tax data from two years prior).
What is the Part B deductible?
Medicare enrollees who receive treatment during the year must also pay a Part B deductible, which is $198 in 2020. After the deductible, enrollees also pay 20 percent of the Medicare-approved amount for care that’s covered under Part B.
But most enrollees have supplemental coverage — from an employer plan, Medicaid, or Medigap — that covers some or all of the out-of-pocket costs that go along with Medicare Part B.
[People who become eligible for Medicare on or after January 1, 2020 are not allowed to purchase Medigap plans C and F, which are the only ones that cover the Part B deductible. But Medigap plans that cover the remaining out-of-pocket costs under Part B continue to be available, and people who were already eligible for Medicare prior to 2020 can keep Medigap Plans C and F, or apply for them if they aren’t already enrolled.]
How do I enroll in Part B?
If you are already receiving Social Security or Railroad Retirement benefits, you will be notified three months prior to your 65th birthday that you are about to become a Part A Medicare enrollee, and that Part B is an option. You’ll receive the Part B card at the same time as the Part A card.
If you choose not to enroll in Part B, you must return the card (which means you’re rejecting Part B coverage) or the premium will automatically start to be deducted from your Social Security checks. If you keep the card, Part B coverage kicks in the month you turn 65.
If you’re not already receiving Social Security or Railroad Retirement benefits, you’ll have an opportunity to enroll in Medicare B (along with Medicare A) during a seven-month window that includes the three months before the month you turn 65, the month you turn 65, and the following three months. If you enroll in the three months prior to the month you turn 65, your coverage will be effective the month you turn 65.
It’s important to note that if you fail to enroll in Part B during your seven-month enrollment period, the program will offer you another opportunity to enroll each succeeding year (January 1 – March 31), with coverage effective July 1. The catch? If and when you do eventually enroll in Medicare B, for each year that you were eligible for Part B but turned it down, your monthly premium will be increased by 10 percent, and the higher rate will be in place for as long as you have Part B.
So if you wait three full years to enroll after your initial enrollment period, you’ll pay premiums that are 30 percent higher than the normal price, for as long as you have Part B coverage (generally, for life). The penalty does not apply, however, if you delay your Part B enrollment because you have other coverage in place from a current employer or your spouse’s current employer.
Should I delay Part B enrollment?
If you have health insurance through your current employer, or through your spouse’s current employer, you may want to delay enrollment in Part B. You’ll need to check with your employer or HR department to make sure that your employer-sponsored coverage will pick up where Medicare A leaves off, but assuming it does, you may want to delay enrolling in Medicare Part B, since it has a premium.
Coverage under a current employer’s plan allows you to delay Part B without a penalty
As long as you enroll in Part B either while you (or your spouse, if your coverage is through your spouse’s employer) are still employed, or within eight months of the end of employment, you’ll be able to enroll in Part B without any penalty. This is regardless of what time of year it is, and regardless of how long ago you turned 65.
COBRA does not count as employer-sponsored coverage for the purpose of delaying Part B enrollment
If your employment ends, you may be eligible to continue your employer-sponsored coverage via COBRA. But coverage under COBRA does not have the same protections as far as access to Part B and the ability to enroll without a penalty. Once your employment ends, you’ve got eight months to sign up for Part B (regardless of what time of year it is, and without a penalty). You can have COBRA coverage during those eight months if you wish. But once it’s been more than eight months since your employment ended, you no longer have open access to Medicare Part B, even if you’re still covered under COBRA.
You have eight months after your employment ends to enroll in Part B without a penalty
Once it’s been more than eight months since your employment ended, the details above about late enrollment in Part B apply. You’ll only be able to sign up for Part B between January 1 and March 31 (with coverage effective July 1), and late enrollment penalties can be applied to your premium.
This is something to keep in mind if you elect COBRA once your employment ends; if your COBRA runs out in the middle of the year (and you haven’t yet enrolled in Part B) you won’t have access to Part B at that point — you’ll have to wait until the following January – March enrollment period, with coverage taking effect in July and a late enrollment penalty that will apply to your Part B premium for the rest of your life.
Can I reject Part B altogether?
Medicare Part B is optional. You can choose to skip it altogether and avoid the premiums. But that means you’re on the hook for the full cost of any services that would otherwise be covered under Part B. For healthy enrollees, that might amount to the occasional office visit and nothing more. But if you end up needing extensive outpatient care — such as kidney dialysis, chemotherapy, radiation, physical therapy, etc. — your bills could add up quickly.
As noted above in the discussion about late enrollments, you will have a chance to sign up for Part B each year, regardless of how long you’ve delayed your enrollment. But the late enrollment penalty could become substantial, depending on how long you’ve been without Part B coverage. And if and when you do decide to enroll, you’ll have to wait until the January-March general enrollment period, with your coverage taking effect in July. So going without Part B when you don’t have other coverage from an employer’s plan is an option, but it’s a fairly risky option.
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.