In 2021, Medicare enrollees may confront several changes in health insurance plans. Some of them apply to Medicare Part D and Medicare Advantage benefits, which are the programs that recipients can change during the annual open enrollment period that lasts from October 15 to December 7. (Here is a summary of everything you should know about the annual enrollment period.)

Nevertheless, there are changes to Original Medicare premiums, cost-sharing, and the high-income brackets and other areas. In 2021, the standard Medicare Part B premium is $148.50 per month. This represents a monthly premium increase of less than $4, well over the standard 2020 premium of $144.60. It was expected to increase significantly, but the federal government passed a short-term spending bill in October 2020 that limited the Part B premium increase for 2021. 

The size of the annual Social Insurance cost of living adjustment also affects the increase in Part B insurance rates for most Medicare beneficiaries (COLA). In a few years, small COLAs have restricted the cost of most enrollees’ Part B payment increases. But the 2021 COLA is 1.3 percent, enough to cover the total Part B increase for almost all Medicare beneficiaries. 

(If a Social Security user’s COLA is insufficient to cover the entire premium increase for Medicare Part B, that applicant’s Part B premium could only increase by the cost of the COLA. This is because Part B premiums are deducted from Social Security checks, and net bills cannot decrease from one year to the next.)

What is the Expected Increase in the Part B Deductible for 2021?

The Part B insurance deductibles for 2021 are equal to $203. This would be slightly higher from $198 in 2020 and $185 in 2019; it was around $183 in 2017 and 2018. 

Some applicants have supplemental coverage that covers their Part B deductible. This coverage offers employer-sponsored plans, Medicaid, and Medigap plans C and F. However, beginning in 2020, Medigap plans C and F will no longer be available to newly eligible enrollees (people can keep these plans if they already have them, and people who were already eligible for Medicare before 2020 can continue to purchase them). 

The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) proposed a prohibition on the sale of Medigap programs that cover the Part B deductible for new enrollees. It’s an attempt to reduce utilization by ensuring that enrollees pay out-of-pocket expenses when they receive health services. 

Are Part A Premiums Going Up in 2021?

Only about 1% of Medicare Part A applicants pay premiums; the rest are eligible for free coverage based on their employment records or spouse’s work history. Part A premiums have increased over the years, and they have surged again for 2020 — despite being lower in 2020 than in 2010. 

For 2021, the Part A premium for applicants with 30+ (but less than 40) quarters of work experience is anticipated to be $263 per month, up from $252/month in 2020. Furthermore, for enrollees with fewer than 30 quarters of work experience, the Part A premium is expected to be $478/month in 2021, up from $458/month in 2020. CMS will finalize the exact amounts in late 2020. 

Is the Medicare Part A Deductible Getting Higher in 2021?

Part A provides the insurance deductible for each benefit period (rather than a calendar period deductible like Part B coverage or private insurance plans). The deductible typically doubles every year. It was $1,364 in 2019, but it will increase to $1,408 in 2020. It has also expanded to $1,484 for 2021. The deductible changes apply to all enrollees, though many have supplemental insurance that pays all or a portion of the Part A deductible. 

What is the Cost of Medicare Part A Coinsurance in 2021?

The Part A deductible covers the first 60 inpatient days of an enrollee’s benefit period. There is a daily coinsurance charge if the individual needs additional inpatient coverage during the same benefit period. It is $371 per day for the 61st through 90th inpatient care in 2021 (up from $352/day in 2020). For 2021, the coinsurance for lifetime reserve days is $742/day, up from $704/day in 2020.

The first 20 days of care in skilled nursing facilities are covered by the Part A deductible paid for the inpatient clinic stay that preceded the coverage in the skilled nursing facility. However, there is a coinsurance requirement for days 21 through 100 in a skilled nursing facility. It will be $185.50 per day in 2021, up from $176 per day in 2020. 

Can I Still Purchase Medigap Plans C and F?

As a result of MACRA (Medicare Access and CHIP Reauthorization Act),

Medigap programs C and F (including Plan F with a high deductible) are no longer available for purchase by users who re-qualify Medicare coverage on or after January 1, 2020.

Applicants who’ve become Medicare-eligible before 2020 can keep their current Plan C or F or register for these programs at a later date, including coverage for 2021. 

Part B deductible ($203 in 2021) is fully covered by Medigap Plans C and F. Other Medigap plans, on the other hand, require enrollees to pay the Part B insurance deductible themselves. The main objective of this change is to discourage overutilization of health services by obliging enrollees to spend at least something when receiving outpatient care, rather than having all expenses covered by a combined application of Medicare Part B and the Medigap plan.

As the high-deductible Plan F was phased out for newly insured enrollees in 2020, a high-deductible Plan G is now available.  

How are Medicare Advantage Premiums Changing During 2021?

According to CMS, the median Medicare Advantage Plan (Part C) insurance rates in 2021 are around $21 per month, down from $23 per month in 2020. For several years, average Advantage costs have been declining, and the annual premium for 2021 is the lowest since 2007. 

However, when only Medicare Advantage plans with Part D prescription drug coverage (MA-PDs) are considered, a Kaiser Family Trust analysis shows that the average monthly premium in 2020 was about $36. MA-PDs strive to be costlier than the average of all MA (Medicare Advantage) plans. 

In 2020, approximately 24 million people had Medicare Advantage plans, with CMS anticipating that number will increase to 26 million by 2021. Enrollment in these plans has increased rapidly over the last 15 years. The total percentage of Medicare recipients has been steadily growing, but Medicare Advantage registration growth has exceeded overall Medicare enrollment growth. Moreover, only 13% of Medicare beneficiaries had Medicare Advantage plans in 2004. By 2020, that number had grown to 36%, and the new Medicare Program Finder tool, which debuted in the mid of 2019, was designed to help accelerate the growth of health plan enrollment. 

People with ESRD (End-Stage Renal Disease) can Sign Up for Medicare Advantage Plans

Long-standing rules prohibited people with end-stage renal disease (ESRD) from enrolling in Medicare Advantage plans unless an ESRD Special Needs Plan was available in their area. Nonetheless, starting in 2021, all Medicare beneficiaries, including those with ESRD, will be eligible for Medicare Advantage plans. This is an outcome of the 21st Century Cures Act, which grants people with end-stage renal disease access to any Medicare Advantage coverage in their state as of 2021.  

Many users with ESRD would still consider that Original Medicare plus a Medicare Part D and Medigap plan is the most cost-effective option in terms of coverage. However, in some states, people under the age of 65 are either unable to enroll in guaranteed-issue Medigap plans or can only do so at exorbitantly high premiums. Furthermore, some states that protect access to Medigap for most beneficiaries under the age of 65 do not extend those coverages to people with ESRD. There is no out-of-pocket cost cap under Original Medicare if supplemental coverage is not purchased.

Out-of-pocket costs for Medicare Advantage plans are limited, as described below. As a result, for ESRD beneficiaries who cannot find an affordable Medigap plan, a Medicare Advantage plan may be a viable option if the person’s doctors and hospitals are in-network with the program.

Is the Medicare Advantage Plan Out-of-Pocket Maximum Changing for 2021?

Medicare Advantage plans must limit enrollees’ out-of-pocket expenses for Part A and Part B medical care (unlike Original Medicare, which has no cap on out-of-pocket costs). The cap excludes the cost of prescribed medicines, as these are covered by Medicare Part D (even when combined with a Medicare Advantage plan).  

For the past few years, the cap was about $6,700, though most plans have had out-of-pocket limits lower than that. The maximum out-of-pocket threshold for Medicare Advantage plans is increasing to $7,550 by 2021 (plus out-of-pocket expenses for prescription drugs).  

Most plans will probably continue to maintain out-of-pocket caps that are lower than the government’s standard rate, but the maximum current for 2021 is pretty significant.

How is Medicare Part D Prescription Drug Plan Changing for 2021?

The maximum allowable deductible for stand-alone Part D prescription drug coverage will be $445 in 2021, slightly higher than $435 in 2020.

In addition, the out-of-pocket maximum (the amount at which catastrophic coverage begins) will incline to $6,550 in 2021, higher from $6,350 in 2020. Copays for people who reach the catastrophic coverage in 2021 will grow slightly, to $3.70 for generic medications and $9.20 for labeled drugs.

In 2021, Medicare recipients with Part D coverage (whether stand-alone or as part of a MA plan) would have access to insulin for a $35 monthly copay. This is expected to save participants several hundred dollars every year. The Donut Hole in Medicare Part D has been filled thanks to the Affordable Care Act. There is no longer a “hole” for generic or brand-name drugs as of 2020. Enrollees in conventional Part D plans will pay 25% of the premium until they meet the catastrophic coverage threshold (after meeting their deductible). In addition, while in the donut hole, enrollees pay 25% of the cost of generic medications in 2020, down from 37% in 2019. 

Nevertheless, the donut hole remains relevant in terms of how prescription costs are counted toward reaching the catastrophic plan threshold, as well as who pays for the drugs (the drug manufacturer or the applicant’s Part D plan). Here’s more information on how it all works.

Key Takeaways

  • For 2021, the approved Part B premium is $148.50 (a federal spending bill limited the increase).
  • The Part B deductible will be $203 in 2021 (up from $199 in 2020).
  • Part A premiums, coinsurance, and deductibles are all increasing in 2021.
  • Newly eligible Medicare beneficiaries can no longer purchase Medigap Plans C and F.
  • The number of applicants enrolled in Medicare Advantage is expected to increase to 26 million by the end of the year.
  • People with ESRD can enroll in Medicare Advantage coverages as of 2021.
  • In 2021, the maximum out-of-pocket limit for Medicare Advantage plans will double to $7,550.
  • The Part D donut hole no longer exists, but the maximum deductible for a standard health plan is increasing to $445 in 2021, and the threshold for entering the catastrophic coverage phase (where out-of-pocket spending is significantly reduced) is growing to $6,550.