Healthy Living on a Budget

What You’ll Pay for Medicare in 2021

For Medicare premiums 2021, look for modest increases in premiums and out-of-pocket costs.

The New Year will usher in a host of adjustments to Medicare that both new enrollees and existing beneficiaries will need to navigate. In order to get the most from your plan, it’s important to understand your out-of-pocket costs, which will vary depending on your income and the type of plan you choose. Here’s a rundown of what you can expect in 2021.

Medicare Part B Premium 2021. Although Part A, which pays for hospital care, is free for most beneficiaries, you’ll pay a monthly premium for Part B, which covers doctor visits and outpatient services. In 2021, the standard monthly premium will be $148.50, up from $144.60 in 2020.

But if you’re a high earner, you’ll pay more. Surcharges for high earners are based on adjusted gross income from two years earlier. In 2020, beneficiaries with 2018 AGI of more than $87,000 ($174,000 for married couples filing jointly) paid $202.40 to $491.60 per month for Part B. Surcharges in 2021 for beneficiaries with 2019 AGIs of more than $88,000 (more than $176,000 for married couples filing jointly) range between $207.90 and $504.90.

Medicare Part D. The average premium for Part D, which covers drug costs, will be about $30 a month in 2021. Seniors with high drug costs may run into a coverage gap, although it has been shrinking. For 2021, the gap begins when the total your plan has paid reaches $4,130, up from $4,020 in 2020. At that point, you’ll receive a 75% discount on brand-name and generic drugs. Drug manufacturers will pick up 70% of the tab, insurers will pay 5% and you’ll pay 25%. Medicare picks up most of the cost, after a small co-pay, once your out-of-pocket spending hits $6,550 (including whatever drug manufacturers paid on your behalf in the coverage gap), up from $6,350 in 2020.

Mind the gap. If you’re new to Medicare, you may be surprised to discover what it doesn’t cover. Part B pays for only 80% of doctor’s visits and other outpatient services. In addition, Medicare doesn’t cover dental care, eye appointments or hearing aids.

There are two ways to address your uncovered expenses. Medicare supplemental insurance, or medigap, policies are offered by private insurers and cover deductibles and co-payments. Medigap policies are identified by letters A through N. Each policy that goes by the same letter must offer the same basic benefits, and usually the only difference is the cost.

Plan F is the most popular policy because of its comprehensive coverage, but as of 2020, Plan F (as well as Plan C) is unavailable for new enrollees. The closest substitute for Plan F is Plan G, which pays for everything that Plan F did except the Medicare Part B deductible. Monthly premiums for Plan G in 2020 ranged from $90 to $170, depending on your age and state, according to MedicareFAQ, an insurance agency that sells supplemental Medicare plans. Anyone enrolled in Medicare before 2020 can still sign up for plans F and C.

An alternative to having both traditional Medicare and a medigap plan is to enroll in a Medicare Advantage plan. Such plans provide medical and prescription drug coverage through private insurance companies. The monthly premium, in addition to Part B, varies depending on which plan you choose. The Center for Medicare and Medicaid Services estimates that the average monthly premium will be $21 in 2021, down from $23.63 in 2020. Advantage policies charge lower premiums than medigap plans but have higher deductibles and co-payments, and your choice of providers may be more limited than with traditional Medicare.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
How to Know When You Can Retire
retirement

How to Know When You Can Retire

You’ve scrimped and saved, but are you really ready to retire? Here are some helpful calculations that could help you decide whether you can actually …
January 5, 2022
The 12 Best Tech Stocks to Buy for 2022
tech stocks

The 12 Best Tech Stocks to Buy for 2022

The best tech-sector picks for the year to come include plays on some of the most exciting emergent technologies, as well as several old-guard mega-ca…
January 3, 2022

Recommended

Could You Lose Your Job if You Get COVID-19?
careers

Could You Lose Your Job if You Get COVID-19?

With omicron surging, many are losing the ability to work. Can they get fired? Will they get paid time off? It depends.
January 12, 2022
What Retirees Will Pay for Medicare in 2022
Medicare

What Retirees Will Pay for Medicare in 2022

Seniors will pay more for Parts B and D this year, though Medicare Advantage plans should be slightly cheaper.
January 12, 2022
Medicare to Consider Lowering Part B Premiums
Medicare

Medicare to Consider Lowering Part B Premiums

Beneficiaries could see a reduced Part B premium after Biogen announced it would slash the price of its expensive, and controversial, new Alzheimer's …
January 12, 2022
New Year's Resolutions to Set Retirees Up for a Successful 2022
happy retirement

New Year's Resolutions to Set Retirees Up for a Successful 2022

Here are five goals that will help you strengthen your finances and save more money.
December 27, 2021