First, the good news. Social Security payments will increase by 5.9% beginning January 2022.
Now the bad news. Your monthly Medicare Part B premiums will increase by 14.5% — from $148.50 to $170.10. This is the largest price increase since 2016 and significantly more than The Centers for Medicare and Medicaid (CMS) predicted last August. At that time they anticipated new premiums of $158.50.
In addition, the Part B annual deductible is increasing from $203 to $233 in 2022.
Why the big increase?
A New Alzheimer Drug
In June the FDA approved use of Aduhelm, a new drug to treat Alzheimer’s. The approval was met with a great deal of controversy. First, there were questions over the drug’s effectiveness. Specifically, whether there were meaningful and quantifiable benefits from taking the drug.
Second, the sky-high cost of the drug. Biogen set the price for a year of treatment at $56,000. The Kaiser Family Foundation has estimated that could cost Medicare nearly $29 billion in just one year.
The CMS hasn’t actually yet confirmed it will cover the cost of Aduhelm. But the anticipated cost increase is being included in next year’s premium anyway. A CMS official said if the agency decides not to cover the cost of the drug, the premium could be lowered. We’ll see about that.
Drugs and Medicare Part B Premiums
You might be wondering why the cost of a drug would impact Medicare Part B premiums since drugs are covered under Part D. Medicare Part D covers retail prescription drugs only – those you buy from a pharmacy. Part B covers out-patient medical services, which includes office visits. Since Aduhelm is administered in a physician’s office, it is covered under Part B.
Making Up for 2021 Medicare Part B Premium Rates
Another contributor to the 2022 increase is the 2021 increase. Or rather, the increase that didn’t happen in 2021. Congress limited the 2021 increase to just 25% of what it would normally have been.
They did so because in the summer of 2020 the actuaries who determine the new premium costs couldn’t get the reliable utilization data needed to predict 2021 costs. Why? The pandemic caused an unprecedented decrease in office visits (covered under Part B) and a surge in hospitalizations (covered under Part A). No one knew how utilization would continue for the rest of the year. Therefore, the typical actuarial tables were set aside, and the increase was capped at a fraction of what it would normally have been.
Now CMS, or rather Medicare recipients, have to pay back a portion of the increase they did not pay in 2021.
Additional Notes on Cost
These rate increases reflect traditional Medicare coverage. If you have a Medicare Advantage Plan, changes to your 2022 premium may be different. Check your 2022 plan document and open enrollment information for cost changes to your plan.
If you have traditional Medicare and your annual income in 2020 was $91,000 or more, you’ll pay more than $170.10 for Medicare Part B. Here are the 2022 premiums for all income levels.
Since we’ve talked about drugs, you should know the average traditional Medicare Part D premium (for retail prescriptions) is increasing from $31.47 a month to $33 a month in 2022.
As I said in my October post take the time to review your options carefully. Before you make a final decision, know what each plans’ coverage and costs, including premiums and out-of-pocket costs, are likely to be.