Of the various costs retirees have to grapple with, health care can be a big one. In fact, seniors are routinely surprised at how high their costs are under Medicare. And that extends to Medicare Part D, which covers prescriptions.
Recently, the Centers for Medicare & Medicaid Services said seniors could see their prescription drug premiums drop by 2023. But that drop isn’t much to write home about, and it could easily be offset by higher deductibles.
Lower premium costs won’t help
Many seniors lived on a fixed income that largely consists of social security. And providing healthcare is a struggle for many retirees. In 2023, seniors can get a break in the form of lower Medicare Part D premiums — to the tune of $0.58, that is.
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That’s right – the average cost of a basic monthly Part D premium is expected to drop from $32.08 to $31.50. So all things considered, seniors may be able to pocket a few extra dollars over the course of the year.
Or will they? While Part D premium costs are expected to fall, next year’s maximum deductible under Part D is expected to increase $25 from $480 to $505. Admittedly, this change won’t affect all seniors as some Part D – plans do not impose a deductible. But those subject to the maximum deductible may see their premium-based savings wash away.
Meanwhile, as is always the case, higher earners will pay more for Part D due to being subject to income-related monthly adjustment amounts, or IRMAAs. These also apply to part B premiums.
Prepare for healthcare costs
Many seniors are caught off guard when they realize how much it costs to get health care under Medicare. But a good way to avoid a financial shock down the line is to consistently fund a health savings account (HSA).
The great thing about HSAs is that funds don’t expire, so employees can contribute to these accounts over the years and take that money into retirement when it’s most needed. HSA withdrawals are tax-free, provided they’re used to pay for qualified medical expenses, and the Part D charges above fall under that umbrella.
Another major benefit of HSAs is that they effectively convert to a traditional retirement savings plan at age 65 in the sense that withdrawals used for non-medical expenses are taxed but not penalized (before age 65, a 20% for non-medical admissions applies). This gives seniors a lot of flexibility.
Stay tuned for more Medicare changes
While it’s technically nice to see seniors perhaps getting a break from their Medicare Part D premiums, the reality is that a $0.58 drop isn’t exactly much to write home about. Meanwhile, enrollees are still waiting to see what changes are coming regarding Medicare Part B.
Last year, Part B premiums rose significantly, affecting the Social Security increase for seniors. It will come as no surprise that a large part B premium increase will follow this year.
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