It’s that magical time of year again. It’s December and 2021 is drawing to a close. After 2020, I really didn’t think a year could seem that long, but 2021 sure made a valiant effort. Yet as we enter the winter solstice, we’re actually approaching the Earth’s shortest season, clocking in just shy of 89 days. For you trivia buffs, the solstice occurs when the sun reaches its southernmost point in our sky for this year and it marks an unofficial beginning of the winter season in the Northern Hemisphere, and the start of the summer season in the Southern Hemisphere.
Surprisingly, this little tidbit of information is not what people typically think about as we enter December. For most, the upcoming Holiday season brings about anticipation and joy as we spend time with family and friends, are thankful for the blessings we have, decorate our homes, and find that perfect gift to give.
And yet there is another important event that occurs at the end of each year, too; one that financial advisors and insurance professionals are quite familiar with – Medicare Open Enrollment. This crucial period of time, which just ended on December 7, 2021, was an opportunity for the more than 63 million people who rely on Medicare to compare coverage options like Original Medicare (Parts A and Part B) and Medicare Advantage and choose health and prescription drug plans for 2022₁.
While everyone has the opportunity to enroll in Medicare initially when they turn age 65, Open Enrollment is the time they get to re-evaluate their coverage and make changes, if necessary. Perhaps you made a mistake the prior year and chose an option that wasn’t a great fit for your needs. Maybe your needs changed, your budget increased or decreased, you have new prescriptions that your current plan doesn’t offer or more. Whatever the reason, each year you’re allowed to make changes to your coverage, which will take effect on January 1, 2022.
This year, however, we had a new wrinkle to address – the cost. On November 12, 2021, the Biden administration announced that it’s raising Medicare premiums, a move that it blamed in part on the cost of drugs.
And while it’s not unusual that Medicare premiums may increase over time, next year’s increase is the largest dollar increase in the health insurance program’s history, according to the Centers for Medicare & Medicaid Services (CMS).
For example, under Medicare Part A, which covers hospitalization and some nursing home and home health care services, the inpatient deductible that patients must pay for each hospital admission will increase by $72 in 2022 to $1,556, up from $1,484 in 2021. And other Medicare charges also rising. The annual Part B deductible, which covers doctor visits, and other outpatient services, such as lab tests and diagnostic screenings, will raise $30 next year to $233, up from this year’s $203₂.
Why the steep increase?
The Biden Administration cites a couple of reasons. First, the rising costs of providing health care to Medicare enrollees, which they blame partly on COVID-19 care. In addition, the CMS plans to hold back some funds in reserves in the event Medicare decides to cover a new Alzheimer’s drug, Aduhelm. The drug was recently approved by the FDA and the CMS is analyzing its costs to determine if it will be covered under the program. While a decision is still pending, the average cost for the drug at $56,000 per year means that the possibility could be a very expensive one.
And while the 14.5 percent Part B premium increase is a stiff one, the Social Security cost-of-living adjustment (COLA) for 2022 — at 5.9 percent, the largest in 30 years – is estimated to average $92 per recipient. So even after the increase in the Medicare Part B premium, most Social Security recipients, whose Part B premiums are typically deducted from their Social Security benefits, will still see a net increase in their monthly check and the COLA will more than offset the monthly hike.
But you know, not everyone is buying what Biden is selling. According to the Senior Citizens League, a nonpartisan seniors group, the 14.5 percent increase in Medicare premiums—the highest since 2016—will eat up the entire adjustment for Social Security recipients with the lowest benefits.
And while Social Security recipients with higher benefits will likely be able to cover the $21.60 per month increase, but they may not wind up with much left.
So, what can you do about it? Well, unfortunately, neither you nor I have control over the premium increases coming our way, so we need to instead find ways to cover the added expense. And while the increase in premiums is probably not significant for those with sufficient assets in reserve, increases over time will add up and gradually become more of a burden. You can start by reviewing your coverage carefully each year. Don’t assume that the plan you chose the year before is automatically the right plan for the next year. Check out all of your options, including whether or not your prescriptions will continue to be covered in your network. Decide if it’s more important to you have a choice of which doctor you see, or if it might make sense to use a different plan’s network of doctors to save on premiums. While Open Enrollment is closed for 2022, you’ll have the opportunity again next December for the following year so make sure this is part of your annual planning discussion.
Also, consider your Social Security benefits. If you haven’t filed yet, you still have time to review your options to ensure you’re getting the most you can by filing at the right time, in the right manner. Your healthcare and your Social Security benefits are integral parts of your larger retirement system and should be considered as part of a holistic approach to retirement.
So as always – be vigilant and stay alert, because you deserve more!