By Marcia Mantell, RMA
At the close of business on Friday, November 12, the Centers for Medicare and Medicaid Services (CMS) announced the 2022 premiums for Medicare Part B. The standard premium will increase more than $20 per person per month beginning in January.
This increase follows just weeks after the positive Social Security COLA boost of 5.9%. The net effect is retirees will see fewer dollars than they may have expected in their monthly Social Security benefits.
Part B Standard Premium Increases in 2022
In 2021, most individuals with Medicare Part B paid $148.50 per month. In 2022, their monthly premium jumps to $170.10 per month – an increase of $21.60 per month. This is the standard, or base, premium that all Part B enrollees pay. Higher-income people pay additional amounts (see below).
Part B is the component of Medicare that helps retirees pay for physicians, outpatient services, durable medical equipment, and certain types of home health services. Services such as outpatient chemotherapy treatments and drugs, and dialysis, along with visits to a primary care physician or a specialist are covered under Part B.
When Medicare was signed into law in 1965, Part B was included. From the beginning, it has always carried a monthly premium that retirees and those who get Medicare due to certain disabilities are required to pay. The premiums are automatically deducted from Social Security payments once an individual is in both programs.
Premiums Rise Well Above General Inflation
Part B premiums fluctuate considerably year to year. Generally, health care costs increase and therefore, Part B premiums rise as well. But there are years when the premium remains flat. And there were three times since the inception of Medicare that premiums decreased for some beneficiaries.
Looking at the last 10 years, Part B premium prices have fluctuated significantly:
Those who have been in Part B since 2013 have seen their premiums increase 62%. Overall inflation during the same time period is up only 13.5%.
Why Such a Big Jump This Year?
Often, big increases are a result of something that happened in prior years along with the outlook for the future. We tend to see several years of lower increases followed by a big jump to realign premiums with actual costs of care and usage.
This year’s increase is a combination of both anticipated trends and making up some ground:
- The law requires that Medicare costs be estimated based on current spending trends. COVID-19 is driving some of the increase in overall health spending.
- Monthly premiums in 2021 only grew 3% as a result of a law change that limited the increase that could be applied due to COVID-19 economic concerns.
- There is significant concern over spending on certain drugs. Medicare needs a sufficient contingency account in anticipation of increases in drug spending.
In addition, there is still a $3.00 per month repayment charge that is a carryover from accommodations of the hold-harmless rule in 2016.
For more in-depth information, read the CMS announcement here.
High-Income Retirees Will Pay Even More
Beginning in 2007, individuals and couples with high income in retirement must pay more for their Part B premium. The amount of the federal subsidy applied to Part B costs decreases as income increases.
This surcharge is called IRMAA – Income-Related Monthly Adjustment Amount. If you are among the 7% of taxpayers who must pay an IRMAA, Social Security will notify you in your annual determination letter. The letters for 2022 should start mailing by early December.
The additional monthly surcharge for 2022 ranges from $68.00 to $408.20. The additional payments are tacked on to the standard Part B premium of $170.10. That means the highest-income Americans – incomes of $500,000 and higher for single filers and $750,000 and up for those married, filing jointly – will pay $578.30 per person per month for Part B in 2022. That’s up from $504.90 last year.
In addition, high-income retirees also pay an IRMAA for their Part D prescription drug plan. Once income reaches $91,000 as a single tax filer or $182,000 for those married, filing jointly, additional monthly adjustment amounts that range from $12.40 to $77.90 are assessed.
Both IRMAA charges are automatically deducted from Social Security benefits before the payment gets deposited to an individual’s personal bank account.
You can see the full list of IRMAA tiers in the recent CMS press release along with other Medicare-related costs that will also increase in 2022.
A Note for Pre-Retirees
Planning for retirement just got more expensive. The overall rise in health care costs along with the outlook that certain drugs are driving a large part of Medicare costs, sends a strong signal that those not yet 65 need to do more to prepare. Health care costs are likely to be a large percentage of your retirement budget, even if you are relatively healthy and a low-user of health services.
One important step is to revise your comprehensive retirement income plan using the latest Medicare numbers.
- Consider if you will pay some amount of the IRMAA surcharge.
- Use Medicare’s “find a plan” tool to look at the current real costs of the prescription drugs you take.
- And, consider funding a Health Savings Account, if available, or at least starting a “bucket” for retirement health care spending while you still have a paycheck.
About the author: By Marcia Mantell, RMA®
Marcia Mantell is the founder and president of Mantell Retirement Consulting, Inc., a retirement business development, marketing & communications, and education company supporting the financial services industry, advisors, and their clients. She is the author of “What’s the Deal with Retirement Planning for Women?” and “What’s the Deal with Social Security for Women?” and blogs at BoomerRetirementBriefs.com.