Medicare Part A and Part B Costs to Rise in 2020

Daily coinsurance rates for seniors in skilled nursing facilities will be rising next year. 

The Centers for Medicare & Medicaid Services on Friday announced the 2020 premiums, deductibles and coinsurance amounts for the Medicare Part A and Part B programs. 

Beneficiaries living in skilled nursing facilities will see their daily coinsurance for days 21 through 100 of extended care services during the benefit period rise from $170.50 in 2019 to $176 in 2020. 

Medicare Part B premiums will also be rising for seniors. The standard monthly premium will increase from $135.50 in 2019 to $144.60 for 2020. Annual deductibles also will increase from $185 for 2019 to $198 for 2020. 

“The increase in the Part B premiums and deductible is largely due to rising spending on physician-administered drugs. These higher costs have a ripple effect and result in higher Part B premiums and deductible,” CMS stated in a release. 

Medicare Part A covers inpatient hospital, skilled nursing facility, and some home health care services, while Part B covers physician services, outpatient hospital services, certain home health services, durable medical equipment, and certain other medical and health services not covered by Medicare Part A.

CMS Announces 2019 Medicare Premiums and Deductibles

On October 12, 2018, the Centers for Medicare & Medicaid Services (CMS) released the 2019 premiums, deductibles, and coinsurance amounts for the Medicare Part A and Part B programs.

Medicare Part B Premiums/Deductibles

Medicare Part B covers physician services, outpatient hospital services, certain home health services, durable medical equipment, and certain other medical and health services not covered by Medicare Part A.  

The standard monthly premium for Medicare Part B enrollees will be $135.50 for 2019, an increase of $1.50 from $134 in 2018. An estimated 2 million Medicare beneficiaries (about 3.5%) will pay less than the full Part B standard monthly premium amount in 2019 due to the statutory hold harmless provision, which limits certain beneficiaries’ increase in their Part B premium to be no greater than the increase in their Social Security benefits. The annual deductible for all Medicare Part B beneficiaries is $185 in 2019, an increase of $2 from the annual deductible $183 in 2018. Premiums and deductibles for Medicare Advantage and Medicare Prescription Drug plans are already finalized and are unaffected by this announcement.

Since 2007, a beneficiary’s Part B monthly premium is based on his or her income. These income-related monthly adjustment amounts (IRMAA) affect roughly 5 percent of people with Medicare Part B.  The total premiums for high income beneficiaries for 2019 are shown in the following table:

Premiums for high-income beneficiaries who are married and lived with their spouse at any time during the taxable year, but file a separate return, are as follows:

Medicare Part A Premiums/Deductibles

Medicare Part A covers inpatient hospital, skilled nursing facility, and some home health care services. About 99 percent of Medicare beneficiaries do not have a Part A premium since they have at least 40 quarters of Medicare-covered employment.

The Medicare Part A inpatient hospital deductible that beneficiaries will pay when admitted to the hospital will be $1,364 in 2019, an increase of $24 from $1,340 in 2018. The Part A inpatient hospital deductible covers beneficiaries’ share of costs for the first 60 days of Medicare-covered inpatient hospital care in a benefit period. In 2019, beneficiaries must pay a coinsurance amount of $341 per day for the 61st through 90th day of a hospitalization ($335 in 2018) in a benefit period and $682 per day for lifetime reserve days ($670 in 2018). For beneficiaries in skilled nursing facilities, the daily coinsurance for days 21 through 100 of extended care services in a benefit period will be $170.50 in 2019 ($167.50 in 2018).

Enrollees age 65 and over who have fewer than 40 quarters of coverage and certain persons with disabilities pay a monthly premium in order to voluntarily enroll in Medicare Part A. Individuals who had at least 30 quarters of coverage or were married to someone with at least 30 quarters of coverage may buy into Part A at a reduced monthly premium rate, which will be $240 in 2019, an $8 increase from 2018. Certain uninsured aged individuals who have less than 30 quarters of coverage and certain individuals with disabilities who have exhausted other entitlement will pay the full premium, which will be $437 a month, a $15 increase from 2018.

For more information on the 2019 Medicare Parts A and B premiums and deductibles (CMS-8068-N, CMS-8069-N, CMS-8070-N), please visit https://www.federalregister.gov/public-inspection.

Federal Court Holds Long-Term Care Insurance Company Breached Policyholder's Contract by Raising Premiums

A U.S. court of appeals has ruled  that a long-term care insurance company breached its contract with a policyholder who purchased a "Reduced-Pay at 65" policy when it raised her premiums after age 65. Newman v. Metropolitan Life Insurance Company (U.S. Ct. App., 7th Cir., No. 17-1844, Feb. 6, 2018).  The case represents a rare holding in favor of policy holders against long term care insurance companies pursuing claims arising from dramatic premium increases. 

The plaintiff, Margery Newman, purchased a long-term care insurance policy from Metropolitan Life Insurance Company when she was age 56. She chose an option called "Reduced-Pay at 65" in which she paid higher premiums until she reached age 65, when the premium would drop to half the original amount. The long-term care insurance contract set out the terms of the reduced-pay option. It also stated that the company could increase premiums on policyholders in the same "class." When Ms. Newman was 67 years old, the company notified her that it was doubling her premium.

Ms. Newman sued MetLife for breach of contract and fraudulent and deceptive business practices, among other claims. The company argued that the increase was imposed on a class-wide basis and applied to all long-term care policyholders over the age of 65, including reduced-pay policyholders. The U.S. district court granted the company's motion to dismiss, ruling that the contract permitted the company to raise Ms. Newman's premium. Ms. Newman appealed.

The U.S. Court of Appeals, 7th Circuit, reversed, holding that the company breached its contract when it raised Ms. Newman's premium. According to the court, "none of the four references in the policy to [the company's] right to change premiums sufficed to disabuse a reasonable person of the understanding that purchasing the Reduced-Pay option took her out of the class of policyholders who were at risk of having their premium increased after their post-age-65 anniversary." The court also allowed Ms. Newman's claims for fraudulent and deceptive business practices to proceed.  The Court ruled that Ms. Newman showed sufficient evidence that the company's marketing of the policy was deceptive and unfair to proceed with those claims.

Although it is possible, an appeal to the United States Supreme Court is unlikely.