How to cope with the rising cost of Medicare
Retirees can look forward to a big raise in 2022: a 5.9 percent increase in Social Security benefits. The annual cost-of-living adjustment is the largest since 1982, and it reflects the quickened pace of inflation this year.
But for beneficiaries also enrolled in Medicare, the raise will be diminished by an even larger cost increase: The premium for Part B, which covers doctor visits and other outpatient care, will soar 14.55 percent.
Those numbers underscore the bigger challenges facing more than 55.5 million retirees on Medicare: Gaps in coverage and high out-of-pocket costs — including deductibles, coinsurance and copayments — can make health care costs difficult to handle, especially for people with lower incomes or those who need expensive drugs.
In 2018, average out-of-pocket spending for people with traditional Medicare was $6,150, according to the Kaiser Family Foundation, with one-third having spent at least 20 percent of their per capita income on health care costs.
And high costs are not just a financial issue: They can lead to problems with access to treatment, poor health and even premature deaths.
It makes sense to pay careful attention to your Medicare coverage selections when you first sign up and during the annual fall enrollment season — and to plan for rising health care costs.
Behind the Part B increase
Two unique factors contributed to the double-digit Part B increase for 2022.
In part, Medicare officials were aiming to recoup costs that went uncovered in 2021. This year’s standard premium rose by just $3.90, to $148.50 per month. The increase would have been larger — the premium usually is set to reflect 25 percent of the projected total program cost for the year — but Congress wanted to limit it as a pandemic-relief measure. Lawmakers
passed legislation that capped the increase at 25 percent of whatever it would have been if Medicare had followed the usual formula.
But Medicare officials also said they needed to build a “contingency reserve” for the possible cost of Aduhelm, the controversial drug approved by the U.S. Food and Drug Administration in June for the treatment of Alzheimer’s disease. The drug was approved despite objections from the FDA’S own scientific advisory panel, and it carried an astonishing price tag: $56,000 per patient annually.
This week, its manufacturer, Biogen, slashed the price to $28,200 on the same day that a group of Alzheimer’s experts and health advocates called on the FDA to pull the drug from the market.
Aduhelm will be administered by health care providers and thus will be covered under Medicare Part B, rather than the Part D prescription drug program. A spokesperson for the Centers for Medicare
and Medicaid Services said Tuesday that the agency expected to release more information by mid-january about a review it is conducting of coverage of Aduhelm and other drugs of its type.
Biogen’s price reduction will increase pressure on Medicare to scale back the 2022 premium increase, according to Tricia Neuman, director of the Medicare policy program at the Kaiser Family Foundation. “Even before Biogen’s announcement, it was unclear if Medicare will cover Aduhelm or how many people on Medicare would get it,” she said. Any reduction probably would not take effect quickly, but it could be done retroactively, she said.
The squeeze
Typically, Part B premiums are deducted from Social Security checks, and the dollar amount of the 2022 increase, $21.60, will reduce the net cost-of-living adjustment by varying amounts, depending on a person’s benefit level.
Lower-income seniors will be squeezed hardest. For example, a senior with a $1,000 monthly Social Security benefit will receive a net adjustment of just 3.75 percent, compared with 5 percent for someone with a $2,500 monthly benefit.
Deductibles and other costsharing requirements are rising, too. The Part B deductible next year will mirror the premium, jumping 14.77 percent, to $233. The annual deductible for Part A, which covers hospitalization, will increase 5 percent, to $1,556.
Many enrollees in traditional Medicare have supplemental insurance coverage, known as Medigap, that takes care of these costsharing burdens; some receive supplemental coverage from former employers as a retirement benefit, and Medicaid plugs gaps for low-income retirees. One in 5 people enrolled in traditional Medicare have no supplemental protection, Kaiser reports.
The cost of Part D prescription drugs can be sky high. Monthly premiums for traditional Medicare enrollees have decreased somewhat in recent years, according to Kaiser. But deductibles and other out-of-pocket expenses have risen faster than inflation; the standard Part D deductible next year will jump 8 percent.
Medicare Part D plans do not cap the total amounts that enrollees must pay out of pocket each year. The coverage is offered through stand-alone plans, or as a benefit in Medicare Advantage plans.
The Part D deductible can vary by plan, but in 2022, it cannot exceed $480. That covers you during the “initial benefit period,” up to $4,430 in combined spending by you and your insurer. Beyond that point, you pay a percentage of drug costs that varies as your spending escalates.
The high cost of drugs can force some seniors to make difficult choices between paying for medications or other household expenses.
Policy options
President Joe Biden’s now-imperiled Build Back Better bill would cap out-of-pocket Part D costs at $2,000 a year, starting in 2024, increasing annually based on the rate of increase in program costs. It also would allow Medicare to negotiate prices with drug companies for some high-cost drugs covered under Part D starting in 2025 and Part B starting in 2027. The legislation also would limit cost-sharing for insulin to no more than $35 per month.
“These are urgently needed, fiscally responsible reforms that will meaningfully help older adults, people with disabilities, and their families,” said Frederic Riccardi, president of the Medicare Rights Center, a nonprofit consumer advocacy and counseling organization. “It’s not just about making drugs more affordable, but making them more accessible, too.”
Riccardi and other advocates also argue that the $2,000 cap would help many, but it won’t provide enough assistance to seniors with very low incomes.