What is Going to be the Medicare Premium for 2023?

Medicare Part B covers medical services like doctor visits, outpatient care, home health services, and durable medical equipment. Most people eligible for Medicare are automatically enrolled in Part B. The standard monthly premium that enrollees pay for Part B coverage is set annually by the Centers for Medicare & Medicaid Services (CMS).

So what will the standard Medicare Part B premium be for 2023?

The 2023 Medicare Part B Premium is Decreasing to $164.90

For 2023, the standard monthly premium for Medicare Part B will be $164.90. This represents a decrease of $5.20 from the monthly premium amount of $170.10 in 2022.

The 2023 Part B premium reduction is mainly attributed to lower-than-projected spending on the controversial Alzheimer’s drug Aduhelm in 2022.

Here are some key details on the 2023 Medicare Part B premium:

• The standard monthly premium will be $164.90, a decrease from $170.10 in 2022.

• This 3% premium reduction will put extra money back in the pockets of Medicare beneficiaries.

• The decrease is primarily driven by lower spending on Aduhelm than originally projected when setting 2022 premiums.

• Monthly premiums are deducted from Social Security checks or paid directly by enrollees.

So after an unusually high increase for 2022, the Medicare Part B monthly premium will come back down in 2023 thanks to slower spending growth. This premium decrease offers some relief for millions of Medicare enrollees.

How the Medicare Part B Premium is Calculated Each Year

Medicare Part B premium amounts are re-determined each year according to formulas set by the Social Security Act. By law, premiums are calculated to cover 25% of projected Part B program costs for the upcoming year.

The main factors influencing the Medicare Part B premium calculation include:

• Projected Part B spending – Based on estimates of what Medicare will spend on Part B services in the coming year. Higher projected spending typically means a higher premium.

• Contingency reserves – Funds held in reserve in case actual spending exceeds projections. Larger reserves mean smaller premium hikes.

• Premium income – Revenue from premiums paid by enrollees. More premium dollars collected reduces how much premiums need to rise.

• Interest credits – Interest earned on Medicare trust fund assets. Higher interest credits reduce the need for premium increases.

• Other factors – Including Medicare beneficiary population growth, projected Social Security cost-of-living increases, and any policy changes.

Annual premium amounts can fluctuate significantly based on changes in these underlying factors from year to year.

What Caused the 2022 Part B Premium Spike?

For context, let’s discuss why premiums increased sharply for 2022. The monthly Part B premium rose from $148.50 in 2021 to $170.10 in 2022 – a 14.5% jump.

This was the largest dollar increase in the program’s history. What led to such a drastic premium hike for 2022?

Several key factors contributed to the unusually high 2022 Part B premium amount:

• Projected spending increase – Anticipated boost in Part B spending due to new Medicare benefits and coverage of more expensive services.

• Lower contingency reserves – Smaller-than-normal reserves to cover excess spending increased premiums needed.

• Aduhelm costs – Projected spending of $11.5 billion on the new Alzheimer’s drug Aduhelm was factored into 2022 premiums.

• Lower interest rates – Lower interest credit projections due to falling interest rates drove premiums higher.

Why the Part B Premium is Dropping for 2023

For 2023, the main reasons the Part B premium is decreasing include:

• Lower Aduhelm spending – Far less was spent on Aduhelm than the $11.5 billion originally projected, reducing needed premium revenue.

• Higher reserves – Higher contingency reserves meant less premium income needed from beneficiaries.

• Part B spending growth – Slower projected growth in Part B spending outside of pharmaceuticals.

• Interest credits – Increased interest income projections helped lower premiums.

The main takeaway is that since actual Aduhelm spending came in nearly 90% below projections, much lower premium hikes were needed for 2023 than forecasted based on 2022 expectations. The resulting Part B premium drop for 2023 passes these savings on to beneficiaries.

Projecting Future Medicare Part B Premium Trends

Looking ahead, analysts expect Medicare Part B premiums to remain relatively stable if spending growth continues near projected levels. However, premium fluctuations from year to year remain likely.

Some factors that could impact Part B premiums moving forward include:

• New high-cost drugs entering the market
• Changes in healthcare utilization patterns
• Rising or falling Medicare enrollment
• Shifts in economic conditions like inflation and interest rates
• Legislation impacting Medicare funding or benefits

While too early to say definitively, most experts believe current conditions point to moderate Part B premium increases in the 3-5% range annually over the next several years. But new developments could always alter projections.

Ultimately, the standard Medicare Part B premium amount each year aims to cover projected program costs and maintain adequate reserves. This ensures the stability and fiscal health of the Part B Trust Fund. While unpredictable fluctuations happen, the goal is to keep premiums as low and stable as realistically possible for America’s Medicare population.

What Does the 2023 Part B Premium Decrease Mean for Beneficiaries?

For the average Medicare beneficiary, the 2023 Part B premium reduction translates to over $60 in savings next year. This puts extra money back in the pockets of millions of enrollees who saw a historically large premium hike for 2022.

Lower premiums help make Medicare coverage more affordable at a time when many seniors live on fixed incomes. This also helps offset some of the rising costs beneficiaries face for healthcare not covered by Medicare.

However, experts point out that while welcome, the 2023 Part B premium reduction does not make up for the significant increases accumulated over the past several years. From 2020 to 2022, the standard monthly Part B premium rose by over 25%.

So while costs are coming down for 2023, Medicare premiums and other out-of-pocket expenses still consume a substantial part of many older Americans’ Social Security benefits. The respite offered by a lower Part B premium next year may be temporary depending on future Medicare spending projections.

What to Know About Medicare Part B Enrollment

Some key notes about enrolling in Medicare Part B:

• Most people will automatically get Part B starting the month they turn 65 if they are already receiving Social Security or Railroad Retirement benefits.

• Others need to manually enroll in Part B during their Initial Enrollment Period – the 7 month window around their 65th birthday month.

• Enrollment is voluntary but you’ll pay permanently higher premiums if you delay signing up outside your enrollment window.

• Higher-income enrollees pay additional income-adjusted premiums on top of the standard premium.

• The Part B deductible for 2023 will be $226 per year and covers some out-of-pocket costs.

• You can switch to a Medicare Advantage plan but will still need to pay the monthly Part B premium.

Key Takeaways on the 2023 Medicare Part B Premium

• For 2023, the standard Medicare Part B monthly premium will be $164.90 – a decrease from $170.10 in 2022.
• The premium reduction is primarily driven by lower-than-projected spending on the Alzheimer’s drug Aduhelm.
• Medicare Part B premium amounts are recalculated annually based on projected spending and other factors.
• Significant increases in projected costs led to the unusually large 2022 Part B premium hike.
• Analysts expect moderate premium increases in the 3-5% range in coming years if spending growth stabilizes.
• The 2023 premium reduction offers modest savings for beneficiaries, but does not make up for recent large increases.
• Understanding Medicare premium costs helps you plan for healthcare expenses in retirement.

The Bottom Line

After spiking 14.5% for 2022, the standard Medicare Part B premium will decrease to $164.90 a month for 2023. This reduction is mainly attributed to lower-than-expected spending on the expensive medication Aduhelm. While the lower premium next year provides some savings, Medicare costs still remain high for many seniors. Staying informed on Medicare premium rate changes can help you financially prepare for healthcare needs in your retirement years.