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.
Siskos is an old hat with the Kiplinger brand. More than a decade ago, she spent eight years writing about personal finance for Kiplinger's Personal Finance magazine, including a monthly column—Starting Out—that served young adults. That was in her salad days. Now she's turned her attention to an audience she hopes to join in a decade or so: retirees. Siskos is the managing editor for Kiplinger's Retirement Report. In between, she broadened her personal-finance repertoire with real estate and investing stories at Old-House Journal, Investing Daily and U.S. News. She comes to Kiplinger by way of the Newseum, where she worked as an exhibit editor.
Should I Trade Stocks or Options?
Answering the question "should I trade stocks or options" will depend on your own risk tolerance, investing objectives and understanding of market dynamics.
By Jared Hoffmann Published
This Is How You Can Be a Snowbird in Retirement
There’s a lot to consider, and warm weather shouldn’t be the only deciding factor. For instance, will you rent or buy? What’s the tax and health care situation?
By Tony Drake, CFP®, Investment Advisor Representative Published
5 Ways to Shop for a Low Mortgage Rate
Becoming a Homeowner Rates are high this year, but you can still find an affordable loan.
By Daniel Bortz Published
Retirees, It's Not Too Late to Buy Life Insurance
life insurance Improvements in underwriting have made it easier to qualify for life insurance, which can be a useful estate-planning tool.
By David Rodeck Published
How to Benefit From Rising Interest Rates
Financial Planning Savers will get the best rates from top-yielding savings and money market deposit accounts at online banks.
By Rivan V. Stinson Last updated
Five Ways To a Cheap Last-Minute Vacation
Travel Procrastinator? No matter. You can pull off a fun and memorable summer getaway on a moment's notice — without breaking the bank.
By Vaishali Varu Published
Credit, Debit or Cash? Which is Best?
credit & debt Credit or debit? Cash? Each payment method has pros and cons. Your best bet is to use a combination that meets your own needs.
By Ellen Kennedy Published
Best Banks for Retirees
banking Kiplinger's 2023 list of the best banks for retirees.
By Lisa Gerstner Published
Best Banks for High-Net-Worth Clients
wealth management Kiplinger's 2023 list of the best banks for higher-net-worth clients.
By Lisa Gerstner Published
Best National Banks
banking Kiplinger's 2023 selections of the best national banks.
By Lisa Gerstner Published