Understanding Medicare premiums
At the end of May, the Medicare Trustees reported that Medicare costs are expected to grow more slowly than was previously expected.
One of the positive effects of this trend is that Medicare premiums are also expected to increase more slowly. What does that mean for you and your family? Here’s a look at the different types of Medicare premiums.
Q: What do people mean by “Medicare premiums”?
A: When people talk about Medicare premiums, they’re often thinking of the Part B premium (Part B primarily covers doctor visits and other outpatient services).
For most beneficiaries, this premium is automatically deducted from their Social Security benefit each month. In 2013, most people with Medicare pay a Part B premium of $104.90 a month.
Q: What other Medicare premiums exist besides Part B?
A: Most people with Medicare do not pay a premium for Medicare Part A (which covers hospital and other inpatient care) because they or their spouse paid enough in Medicare taxes during their working years to qualify for premium-free Part A.
If you have a Part D prescription drug plan, you do pay premiums. In 2013, the national average for a Part D monthly premium is $40.18, but Part D premiums vary widely from plan to plan and region to region.
If you have a Medicare Advantage plan, your plan usually charges an additional premium.
Finally, you may have a private Medicare supplemental policy, either from a former employer or private company. The premiums for these policies vary significantly.
Q: How are Medicare premiums determined?
A: By law, the Part B premium must cover 25 percent of Medicare’s Part B costs. When Medicare costs grow more slowly, so do premiums.
Part D premiums are similarly tied to the costs of prescription drugs.
Medicare Advantage premiums are determined by a more complicated process, but they also reflect trends in costs.
Because Part D and Medicare Advantage plans are run by private companies, premiums can vary a lot. But even so, when health care costs rise more slowly, premiums usually do too.
Q: Does everyone pay the same premium?
A: If your income is more than $85,000 (for just you, or $170,000 for you and your spouse), you pay an additional Part B premium.
How much more depends on your income: People with the highest incomes pay the most.
Also, since 2011, the same high-income beneficiaries have paid higher Part D premiums. Part A premiums and Medicare Advantage premiums are not affected by these rules.
Q: If I have a limited income, can I get help paying my premiums?
A: For people with limited incomes and resources, the Part D Extra Help program covers all or most of their Part D premium, as well as other pharmacy costs. You can find out if you qualify and apply online at www.socialsecurity.gov/prescriptionhelp or call 800-MEDICARE.
Each state also has Medicare Savings Programs that cover Part B premiums for people with limited incomes. In some cases, these programs also cover other Medicare costs.
To learn more, call 800-MEDICARE and ask for a referral to your local state health insurance assistance program (SHIP), visit www.familiesusa.org/re sources/program-locator and click on your state.
Q: What will happen to Medicare premiums in the future?
A: Medicare premiums depend greatly on what happens to health care costs, specifically Medicare costs, in the future.
No one knows for sure if the recent slowdown in Medicare costs will continue.
The early indications from the Medicare Trustees’ report are that the trend should continue for now, and that the 2014 Part B premium will be unchanged from 2013. For anyone with Medicare living on a fixed income-and that’s most people-this is encouraging news.
Pollack is executive director of Families USA.