Medicare Deductibles and How to Avoid Them

Deductibles are essentially flat dollar amounts you must pay before your Medicare benefits kick in.  All told, in 2017 the total Medicare deductibles add up to potentially $3,187 in costs just for this year!  Plus, keeping up with them is no small task as they change (almost) every year.

To keep things simple, just remember this: A Medicare deductible is the amount of money you are required to spend out of your own pocket (first!) every year before your Medicare Plan starts paying for things. That’s really all there is to it.  If you have Original Medicare Part A, Original Medicare Part B and Medicare Part D, you’ll be “satisfying” deductibles before any of your claims or prescription drugs are paid for.  There are of course ways to not have to pay those deductibles, and we’ll quickly review those options below.

Some background: The Centers for Medicare and Medicaid Services (CMS) usually publish their deducible amounts for the following year in November for Medicare Part A and Medicare Part B.  They usually get around to publishing Medicare Part D deductibles in October of the prior year.  Like I said, they change every year.  Here’s what they are for 2017.

Medicare Part A Deductible:

$1,316

Medicare Part B Deductible:

$183

Medicare Part D Deductible:

$400

As I mentioned above, in 2017 this means if you have Original Medicare and a basic PDP plan, you’re going to potentially have to come up with $3,187 out of your wallet (or purse) before anything gets paid.  That’s quite a bit of money exposure I’m sure you’d much rather keep under the mattress or spend it on a vacation to the beach.  (If you do, go to the beach, make sure to see if your Medicare benefits will travel with you by clicking here).

While somewhere in the neighborhood of 20% of folks on Medicare don’t have either an MAPD or a Medicare Supplement, I’m a big fan of having some sort of supplemental or additional policy on top of having Original Medicare A and B.  I’m definitely not a big fan of going “bare with Medicare” as I outlined in a previous post, essentially because Original Medicare A and Medicare B do not protect or limit your financial exposure should a catastrophic health even happen to you.  You really need a MOOP!  If you’d like to read more about this, go ahead and click here.

The Takeaway:

If you’re shopping for Medicare Advantage plans (MAPD) the best place to do it (objectively of course) and really the ONLY place to do so to see all of your options at once is on the Medicare.gov site.  You can get there by clicking here.

If you don’t want to buy a Medicare Supplement or MAPD plan from a private insurance carrier and choose to keep Original Medicare for your medical coverage, you’ll still need to buy a PDP plan.  You can save yourself the pain of having to pay a $400 deductible for your prescription drugs by simply choosing a PDP plan that doesn’t have a deductible. Most “basic” plans (cheapest) have the deductible, but there are usually a few every year that are reasonably priced ($25-$35 per month range) that have no deducible.  You can search for those plans by clicking here, right on the Medicare.gov website.

Medicare Premiums Going up, Benefits Going down in 2017

Today, the Centers for Medicare & Medicaid Services (CMS) announced the 2017 premiums for the Medicare inpatient hospital (Part A) and physician and outpatient hospital services (Part B) programs.

And guess what?  They’re going up.  Especially if you’re rich. Not even rich, really.  Just better off than most.  Funny how the timing of this happens right after the Presidential election, hmm?

The “average” Medicare Part B premium will be about $109.00, compared to $104.90 for the past four years.  That’s for about 65% of the Medicare population.  The standard monthly premium for Medicare Part B will be $134.00 for the other 30% in 2017, which is a 10 percent increase from the 2016 premium of $121.80.

The above changes do not affect your Medicare Advantage monthly premiums but they may impact you if you’re on a Medicare Supplement plan that covers either the Part A and/or the Part B deductibles.  More about deductible increases later in the post.

Higher Income?  Higher Premiums for You!

If you did the quick math above, you’ll notice we have 5% of the population left to talk about.  These 5% pay much higher costs for the exact same Medicare coverage.

Since 2007, people with higher incomes have to pay higher Medicare Part B monthly premiums. I covered this pretty extensively in a post you can read by clicking here.  These income-related monthly premium rates affect roughly 5% of people with Medicare.

Individuals earning between $85,001 and $107,000 and couples earning between $170,001 and $214,000 will see their monthly premiums rise from $170.50 a person this year to about $187.50 in 2017. For those earning more than $214,000, or $428,000 for couples, the increase is to $428.60 a month, from $389.80 in 2016.

Medicare Deductibles Increase in 2017

The Medicare Part A inpatient hospital deductible that beneficiaries pay when admitted to the hospital will be $1,316 per benefit period in 2017, an increase of $28 from $1,288 in 2016.

If that wasn’t enough, CMS also announced that the annual deductible for all Medicare Part B beneficiaries will be increasing to $183 in 2017 (compared to $166 in 2016).

 More Bad News – Your Social Security Check

In 2017, Social Security benefits will rise a lousy 0.3%. Social Security says the cost-of-living adjustment will add $5 to the average monthly payment for all retired workers. This means that whopping $5 won’t cover the increase in your Medicare Part B premium, so your checks will actually be getting a bit smaller this year.

The Takeaway:

Not much you can do about this, really.  If you’re on a Medicare Advantage plan, these increases will not affect your plans, at least in 2017.  However if you’re on a Medicare Supplement plan (Medigap), your insurance company has been waiting on this announcement for some time.  That’s because they have to set their 2017 Medicare Supplement pricing, and increasing Part A and/or Part B deductibles means they’ll have to pay more out in claims.  More paid claims equals higher policy premiums.  Keep an eye on your Medicare Supplement renewal premiums when you get them in the mail… most carriers send them out in the first three months of the year.  An annual increase larger than 5-9% may mean it’s time to shop for a Medicare Advantage plan.  You can check out my post on those types of plans by clicking here.