Medicare Premiums, Deductibles for Parts A, B to Increase in 2020
Medicare premiums for Parts A and B will increase by about 7% and 5%, respectively, in 2020 largely because of the high costs of physician-administered drugs.
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By - The Medicare premium for premium will rise nearly seven percent in 2020, from $135.50 in 2019 to $144.60 next year, while the premium for Part A will rise almost five percent from $437.00 to $458.00 a month, according to a CMS press release.
The annual deductible for Part B coverage, which covers doctor visits and outpatient care, will also go up by seven percent to $198.00 in 2020, for an increase of $13.00 from $185.00 in 2019. 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 press release stated.
Medicare premiums and deductibles have experienced significant increases over the last couple of years.
CMS reported last year that Part B premiums will increase by $1.50 from $134.00 in 2018 to $135.50 this year. The difference in premiums from 2019 to 2020 is almost 500 percent more than the difference between 2018 and 2019 premiums.
In addition, Part A deductibles increased from $1,340.00 in 2018 to $1,364.00 in 2019, for just under a two percent ($24.00) increase. In 2020, the hospital deductible will increase by $44.00, from $1,364.00 in 2019 to $1,408.00 in 2020, which is almost a 3.5 percent increase.
In addition, beneficiaries will pay a coinsurance amount of $352.00 per day for the 61st through the 90th day of hospitalization, up $9.00 from $341.00 in 2019, and $704.00 per day for lifetime reserve days, up $22.00 from this year.
Meanwhile, Medicare Advantage premiums will hit a new low in 2020. CMS recently announced that Medicare Advantage premiums are expected to decrease by 23 percent compared to 2018 and will be the lowest in the last thirteen years while plan choices, benefits, and enrollment continues to rise.
The growth in Medicare premiums and deductibles this year is attributed to rising spending on physician-administered drugs. The higher costs have a ripple effect and result in higher Part B premiums and deductible, according to the press release.
Under Medicare Part B, the law currently requires CMS to pay the average sales price for drugs and also pay physicians a percentage of a drug’s sale price, according to the press release. This payment methodology may incent pharmaceutical companies to increase drug prices and providers to prescribe more expensive drugs in order to maximize Medicare reimbursement.
HHS proposed the International Pricing Index model in October of 2018 with intent to decrease drug costs and make them more affordable for Medicare beneficiaries, according to a 2018 press release.
The IPI model is expected to replace the current Medicare Part B reimbursement policy for providers and hospitals.
“President Trump promised that he would bring down drug prices and put American patients first,” HHS Secretary Alex Azar stated in the press release. “With his innovative approach, he is now proposing historic changes to how Medicare pays for some of the most expensive prescription drugs, securing for the American people a share of the price concessions that drug makers voluntarily give to other countries.”
The model would reduce Medicare payments for a set of costly drugs to what other countries pay, remove incentives that have the potential to encourage the prescribing of more expensive drugs, and reduce physician burden by enabling private sector vendors to play a larger role in the purchase and distribution of these drugs, according to the press release.
“The IPI model replaces a high price point currently used in the program with a more rational price point between the average of private payers and the average of what foreign governments pay for these drugs,” the press release stated. “All wealthy countries would not be using competitive models for pricing this set of costly drugs. The pharmaceutical industry would finally be pressured to fairly allocate the burden or funding innovation across wealthy countries.”
In addition, the IPI model is expected to save the Medicare and Medicaid programs more than $17 billion over its first five years, and more than $50 billion in its first eight years.
The model has yet to be finalized, but lowering prescription drug costs is still a top priority for the administration.
