Medicare Projections how high can the premiums go?
If you are or ever plan to retire there is one absolute: Medicare.
Federal law states that anyone eligible for Social Security benefits must also accept Medicare Part A when eligible. Failure to do so results in the forfeiture of current, future, and past Social Security benefits.
Thankfully, Medicare, for those who are properly insured and use the program accordingly, is fantastic, but; there are costs associated with it, which, for many, are the premiums.
In 2021, on a national basis, for a member to be fully insured under Original Medicare the premiums are:
- Part A: premium free for those who qualify for Social Security benefits.
- Part B: $148.50 a month.
- Part D (prescription medications): $70.16 a month (includes deductible).
- Supplemental coverage (Medigap Plan policy): $175.42 a month.
- Total cost per month for a 65-year-old couple: $788.16
- Annually this cost is: $9,457.92.
The key, especially when planning for retirement is determining the inflation rate of these premiums, and luckily there is the federal government.
Each year the federal government, through the Medicare Board of Trustees releases projections on what can be expected in the future for Medicare premiums in its Annual Report.
Unfortunately, in 2020 The Trustees “believe that it is not possible to adjust the estimates accurately at this time” due to Covid-19”, but from the 2019 Annual Report the Trustees reported that the premiums are projected to inflate through the year 2028 as follows:
- Part B: 6.21%. The premium is projected to be $226.30 a month.
- Part D: 6.47%. The total cost (premium + deductible) is projected to be over $106.00 a month.
- Supplemental coverage (Medigap) is not projected by the Trustees, but the costs covered by these plans are projected to inflate by 3.25%.
- Historically, on a national average, the “step-up” in rate for these premiums has been over 2.00% for the last 5 years.
- The blended inflation rate for Supplemental coverage is projected to be about 5.40%.
For that 65-year-old couple retiring in 2021, who are incurring $9,457.92 a year in premiums for their Medicare coverage, if they live until age 85 and the inflation rates remain constant their total cost for Medicare will be over $372,000.00. Please note that the projection does not reflect IRMAA.
With Covid-19 taking its toll on the nation, as well as, the healthcare system and Medicare the projections provided by the Medicare Board Trustees just may remain constant for quite a while.
Your health is your greatest asset, the time to plan for it is today!