Last Updated: October 27, 2009
If you're in retirement or planning for retirement, it's quite possible that you may have to adjust your projected health care expenses for next year. In 2010, the basic premium for Medicare Part B will rise above $100 a month for the first time in the program's history.
To be fair, 73 percent of all Medicare beneficiaries will continue to pay the same $96.40 premium amount in 2010, according to the Centers for Medicare and Medicaid Services' (CMS) Web site. Beneficiaries who currently have the Social Security Administration (SSA), withhold their Part B premium and have incomes of $85,000 or less (or $170,000 or less for joint filers) will not have an increase in their Part B premium in 2010.
For all others, about 12 million Medicare beneficiaries, the standard Medicare Part B monthly premium will be $110.50 in 2010, which is a 15% increase over the 2009 premium. According to the CMS, the Medicare Part B premium is increasing in 2010 due to possible increases in Part B costs. If your income is above $85,000 (single) or $170,000 (married couple), then your Medicare Part B premium may be higher than $110.50 per month, according to the CMS.
The increase will go into effect unless overruled by Congress. Kathleen Sebelius, U.S. Health and Human Services Secretary, asked the Senate to pass a bill blocking the increase. The measure has already passed in the House. Learn more about the changes in Medicare's basic premium and how you may be affected.
So what does all this mean for your budget if you are or might be affected by the increase?
"Uncertainties such as this reinforce the importance of both a comprehensive financial plan and an adequate emergency fund for people of all ages," said FPA member Tyler Townsend, CFP® of Townsend Financial.
The CMS also announced the premiums that seniors pay for Medicare Advantage plans will increase an average of 25% next year, largely because insurers are canceling many plans that carry no premiums.
For his part, FPA member Chris Cooper, CFP®,MSFS, EA, president of Chris Cooper & Company, Inc., said the following about the Medicare Advantage premium hikes: "There's a saying if it's too good to be true, then it's too good to be true. Medicare Advantage plans have always been sold as 'get more from your Medicare' and pay no premium. It had to stop sooner or later."
He said the major problem with Medicare Advantage plans is this: "They go out of business faster than any other health insurance plan. But they attract healthy seniors with their low co-pays, no premium other than Part B, and having a few other benefits like paying for an annual eye exam, dental checkups and cleanings. But all these things do cost money."
Cooper's advice to those faced with increased Medicare Advantage premiums is to "buy the best health insurance possible, as you may not have another opportunity to buy it again. Secondly, if you live in more than one state (New York in the summer and Florida in the winter) then do not go with a Medicare Advantage, as you will not have in network providers in one of your two states. Third, plans that cover small dollar services usually do not pay for more expensive, restorative care, such as physical therapy after a stroke, for as long as a plan that does not offer such low dollar benefits."
"Remember the old adage," Cooper said. "You get what you pay for. And if you aren't paying for it, you will, with higher out-of-pocket expenses, or no coverage for large dollar health care needs."
A financial planner can help you plan for your health care expenses. Find a financial planner.