Every year, Medicare announces a list of new updates to the insurance program. The updates that might seem trivial and minor have a significant impact on enrollees’ finances and coverage. It’s for that reason enrollees need to keep a close eye on the annual updates.
Historically, Medicare changes most often expand the program, but changes also involve the amount you pay in premiums, deductibles, and coinsurance – some go up, some go down.
So, what are the Medicare changes in 2020?
The key takeaways from the 2020 Medicare changes include:
Medicare Part A is a free coverage, often referred to as ‘hospital insurance’. The plan provides coverage for inpatient care during hospital admittance, skilled nursing facilities, and, in certain scenarios, home health care.
When an individual turns 65, Medicare Part A eligibility is automatic, and no premium is paid, unless they have less than 40 quarters – equal to about ten years – of work history (1% of enrollees). Although most do not pay a premium, Part A does have out-of-pocket costs when care is needed.
The premiums for those who do not have 40 quarters of work history increased again in 2020. Part A premium for individuals with between 30 and 40 quarters of work history is now $252 per month, and for those with less than 30 quarters of work history, the premium is $458 per month.
|2019 Medicare Part A Premium||2020 Medicare Part A Premium|
|Fewer than 30 quarters of work history||$437/month||$458/month|
|30+ quarters of work history (but less than 40)||$240/month||$252/month|
Part A deductible applies to each benefit period and can be necessary more than once per year. The deductible generally increases each year, and in 2020 it rose to $1,408 from $1,364. This increase applies to all enrollees, although many may have supplemental coverage that pays for the cost.
|2019 Medicare Part A Deductible||2020 Medicare Part A Deductible|
Part A deductible only covers the first 60 inpatient days. Should additional inpatient coverage be required, patients will incur a daily coinsurance charge. For 2020, the Part A coinsurance fee is $352 per day for the 61st through 90th day of inpatient care and $704 per day for lifetime reserve days (an additional 60 days).
When in skilled nursing facilities, the first 20 days are covered with the Part A deductible. Coinsurance that applies to days 21 through 100 is $176 per day in 2020.
For Medicare Part B, a monthly premium is automatically deducted from an individual’s benefit payment. The plan covers outpatient hospital services (X-rays, diagnostic tests, medical supplies), physician fees, certain home health services, and other medical services not covered by Part A.
In 2020, there have been notable changes to both the premiums and deductibles.
In 2020, the Medicare Part B standard premium rose to $144.60 per month, up $9.10 from 2019.
This raise is in accordance with the Social Security cost of living adjustment (1.6 percent for 2020). This adjustment increased the average retiree’s total benefit by about $24 per month, meaning the $9.10 increase in Part B premium costs should be manageable for most, meaning it will apply to nearly all Part B enrollees.
|Individual Tax Filers||Married, file jointly||Adjustment Amount||Monthly Premium|
|Up to $87,000||Up to $174,000||$0.00||$144.60|
|$87,000 – $109,000||$174,000 – $218,000||$57.80||$202.40|
|$109,000 – $136,000||$218,000 – $272,000||$144.60||$289.20|
|$136,000 – $163,000||$272,000 – $326,000||$231.40||$376.00|
|$163,000 – $500,000||$326,000 – $750,000||$318.10||$462.70|
|$500,000 or more||$750,000 or more||$347.00||$491.60|
Source: Center for Medicare and Medicaid Services
The annual deductible for all Medicare Part B beneficiaries is $198 in 2020, an increase of $13 from last year. Once this deductible is met, enrollees typically pay 20% of covered services.
|2019 Medicare Part B Deductible||2020 Medicare Part B Deductible|
It’s worth bearing in mind that supplemental coverage is available to pay for Part B deductibles. This coverage includes Medicaid, employer-sponsored plans, and Medigap plans C and F.
Medicare Part D is a program introduced by the federal government as a way for Medicare beneficiaries to get prescription drug coverage.
The two plans (Prescription Drug Plan and Medicare Advantage (MA) Plan) cover prescription drug costs, and MA additionally covers various types of medical services such as in-home care.
The various Medicare Part D plans can differ substantially from provider to provider. But according to the Centers for Medicare and Medicaid Services, the average basic monthly premium for Medicare Part D is around $30 in 2020, down from $32.50 the year previous.
Just like Medicare Part B premiums, higher earners will pay extra.
And while not every coverage requires deductible payments, in 2020, the maximum it can be is $435, up from $415. The catastrophic coverage phase threshold (where out-of-pocket costs drop significantly) has also risen to $6,350 from $5,100.
The Medicare Part D donut hole closed in 2020. This means enrollees now only have to pay 25% for both brand and generic prescription drugs in the ‘coverage gap/donut hole’ until they reach the catastrophic coverage threshold ($6,350).
In 2012, enrollees were responsible for 50% of the costs until they reached the catastrophic coverage threshold. This figure has continued to gradually decrease year on year. Although the amount now sits at 25%, the donut hole is still relevant bridging the gap towards reaching the catastrophic coverage threshold.
It’s widely known that Medicare beneficiaries with high incomes pay higher premiums for Part B and Part D. And in 2020, the income brackets have been adjusted in accordance with inflation. Ever since income brackets were introduced, the high-income threshold has been set at $85,000, but in 2020, this has risen to $87,000.
Those earning over $87,000 per year will now meet the first tier of additional Part B premium costs – where the cost increases from $144.60 to $202.40.
Medigap Plan C and Plan F cover Part B deductible costs in full, but, as of 2020, the plans are no longer available for new Medicare enrollees. Those who became eligible for Medicare before 2020 can keep the plans if they have them and are still able to apply in the future.
The reason for banning the sale of Medigap Plan C and Plan F to new enrollees is so that some out-of-pocket costs are incurred when they receive medical care, as opposed to all costs being covered – thus discouraging overuse.
The most notable Medicare changes in 2020 that will undoubtedly have the biggest impact are the elimination of the ‘donut hole’ and withdrawal of Medigap Plan C and Medigap Plan F to new enrollees. Elsewhere, the increase in premiums, deductibles and copayments will require additional budgeting for the additional expense.
The 2020 Medicare changes will, in some situations, ease headaches, but in others they’ll introduce extra challenges and expenses.
For expert advice relating to your unique situation, get in touch with our advisors to talk through your requirements and find the best coverage plan for you. Get in touch with us today on 1-844-236-0228.