Among the various expenses that retirees are forced to meet, health care can be important. In fact, seniors are regularly 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 may see their premiums for prescription drug coverage drop in 2023. But that drop isn’t very attractive and could easily be offset by higher deductibles.
Lower premium costs won’t go far
Many seniors lived on a fixed income made up largely of Social Security. And affording health care is a struggle for many retirees. In 2023, seniors could get a break in the form of lower Medicare Part D premiums — as much as $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. All in all, seniors may be looking to pocket a few extra bucks over the course of the year.
Or will they? While Part D premium costs are expected to drop, next year’s maximum deductible under Part D is expected to increase by $25, from $480 to $505. Admittedly, this change will not affect all seniors, as some Part D plans do not impose a deductible. But those who are subject to the maximum deductible could see their premium-based savings washed away.
Meanwhile, as is always the case, high earners will pay more for Part D due to being subject to monthly income-related adjustment amounts, or IRMAAs. These also apply to Part B premiums.
Prepare for healthcare expenses
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 long-term financial shock is to systematically fund a health savings account (HSA).
The beauty of HSAs is that the funds don’t expire, so workers can contribute to these accounts over the years and carry that money into retirement when it’s likely to be needed most. HSA withdrawals are tax exempt, provided they are used to pay qualified medical expenses, and the costs in Part D above fall under this umbrella.
Another great thing about HSAs is that at age 65 they effectively convert to a traditional retirement savings plan in that withdrawals used for non-medical expenses are taxed but not penalized ( before age 65, a 20% penalty for non-medical withdrawals applies). This gives seniors a lot of flexibility.
Stay tuned for more changes to Medicare
While it’s technically nice to see that seniors may be getting a break on their Medicare Part D premiums, the reality is that a $0.58 drop isn’t really that exciting. Meanwhile, enrollees are still waiting to see what changes will happen regarding Medicare Part B.
Last year, Part B premiums rose dramatically, eating away at the increase in Social Security for the elderly. It will come as no surprise to see a significant rise in Part B premiums this year to follow.
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