By Paul S. McNulty, CFP®
The average couple will need $295,000 for medical bills in retirement. (1) And that doesn’t include long-term care. That’s a staggering amount most people haven’t thought about. Medicare does not pay for everything, and you should know what it does cover and what it doesn’t. Here are the changes to Medicare in 2021 to keep in mind.
A number of Medicare costs have increased for 2021. While most people get Part A premium-free, those who do pay will now be paying $471. If you worked less than 30 quarters of Medicare-eligible employment, you will have to pay the premium. The Part A deductible has also increased to $1,484 for each benefit period. Congress halted the projected $50 increase to Part B premiums because of COVID-19, so the increase is only $3.90 a month and premiums are now $148.50 (2) for individuals who make $88,00 or less and increase as income goes up. In addition, the deductible for Part B has increased to $203.
Because of the coronavirus, the Center for Medicare & Medicaid Services has increased the scope of telehealth services covered under Medicare, including phone-only evaluations and management and behavioral health counseling. In addition, there are increased Medicare payments for COVID-19 hospital stays. Hospitals are paid 20% more, (3) but this increase does not affect retirees in any way.
Medigap C & F
Medigap supplement Plan F and Plan C are no longer available to those who became eligible for Medicare after December 31, 2019. Supplement Plans F and C cover the cost of the Part B deductible, and they are no longer allowed.
If you already have a Part F or Part C plan, you are allowed to keep it. Anyone who became eligible for Medicare before January 1, 2020, is exempt from the law change. You can have one of those plans and also switch freely from one plan to another without risking the loss of eligibility. Even if you don’t currently have a Medigap plan, you can still purchase a Part F or Part C plan if you were eligible for Medicare prior to January 1, 2020.
Massachusetts offers its own 3-tier Medigap plans: core plan, supplemental 1 plan, and supplemental 1A plan. For more information, visit the medicare.com site, which details these plans.
Medicare Part D Coverage Gap
The maximum allowable annual deductible for Part D coverage has gone up to $445 in 2021. The coverage limit for Plan D is $4,130. When you are in the coverage gap, you will pay 25% of the price of formulary and generic drugs. (4) Once you spend $6,550 in out-of-pocket payments, catastrophic coverage kicks in.
Other Significant Changes
Starting in 2021, a larger pool of Advantage plans and Part D prescription drug plans will offer $35 or less copays for insulin, which is great news for diabetics.
While Medicare premiums have not risen relatively high in 2021, your financial plan should take into consideration the average $295,000 in medical expenses you will have to pay during the course of your retirement. At Boston Metro Advisor, we are here to help you before and during retirement, so let’s talk about your plan and assess whether you are ready for the medical bills you might incur during this important life stage. Send me an email at [email protected] or call me at (781) 995-0253.
Paul McNulty is the founder of Boston Metro Advisor with over 20 years of experience helping people navigate the ups and downs of the economy toward the financial future they envision. His education consists of a Bachelor of Science in business administration from the University of Rhode Island and the CERTIFIED FINANCIAL PLANNER™ (CFP®) professional designation.
Paul’s experience and education have made him a multi-faceted professional capable of assisting people with virtually all their financial needs. His services include every facet of retirement planning, from 401(k) rollover services and income planning to wealth management and estate planning. Paul has been active in his community over the years as a youth sports coach. When he’s not spending time with his wife, Cindy, and their two children, who are both recent college graduates, Paul enjoys reading, playing golf, and fishing. Learn more about Paul by connecting with him on LinkedIn.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.