Every year the Centers for Medicare and Medicaid Services (CMS) announce changes to the Medicare system including changes to premiums, coverage, deductibles, and coinsurance amounts.

For 2021 CMS has announced that standard premiums for Medicare Part B (medical) which almost everyone on Medicare pays, will go up $3.90 per month. This is much less than the $50 per month increase CMS projected after unprecedented Medicare spending on the COVID-19 pandemic. Fortunately, Congress intervened to offset the projected raise making 2021 premiums $148.50 instead of almost $200. 

Medicare annual open enrollment runs from Oct. 15 to Dec. 7 every year.

Keep reading to learn about other changes including historic low premiums for Part C (Medicare Advantage) and Part D (Prescription Drug) coverage as well as changes to Medigap plans for 2021.

Key Takeaways

  • Medicare Part A premiums increased to $471, but many people qualify for premium-free coverage.
  • Medicare Part B standard premiums increased to $148.50, with a $203 deductible.
  • Medicare Part B now covers acupuncture treatments.
  • Select Medicare Advantage and Part D Prescription Drug plans have lower premiums and offer insulin for $35 per month.
  • Some Medicare Advantage plans now cover ESRD treatment.
  • Due to the COVID-19 pandemic, CMS extended numerous Medicare treatment waivers that will likely continue into 2021.

Medicare Part A

Medicare Part A covers inpatient hospital, skilled nursing facility, and some home healthcare services and is premium free for anyone who has 40 quarters or more of Medicare-covered employment. According to CMS, approximately 99% of Medicare beneficiaries do not pay a Medicare Part A premium.

If you have to pay for Part A coverage and have fewer than 30 quarters, your premium goes up to $471 in 2021 (from $458 in 2020). If you have between 30 and 39 quarters your new premium is $259, up $7 from $252 in 2020.

Medicare Part B

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. New Part B coverage for 2021 includes up to 12 acupuncture visits in 90 days for chronic low back pain. 

Part B standard monthly premiums will increase $3.90 to $148.50 for 2021 (or higher depending on income). The annual deductible will be $203 in 2021, up $5 from 2020.

Medigap

When you enroll in Medicare, you must choose between Original Medicare (Parts A and B) and a Medicare Advantage Plan (Part C). Original Medicare covers a lot of costs, but not all. So, most people who opt for Original Medicare also get a Medigap plan. Medigap policies, also known as Medicare Supplement Insurance, are sold by private companies. Premiums vary by company and coverage provided. Medigap is designed to fill the gaps in Original Medicare coverage and, in some cases, cover medical care when you travel outside the U.S.

As of Jan. 1, 2020, Medigap plans sold to new people with Medicare could no longer cover the Part B deductible. Due to this, Plans C and F are no longer available to people new to Medicare starting Jan. 1, 2020. You can keep your plan if you were already covered by one of these plans prior to Jan. 1, 2020. Exception: If you were eligible for Medicare before January 1, 2020, but not yet enrolled, you may be able to buy Plan C or F. 

Medigap Plans F and G High-Deductible

Medigap Plans F and G offer high-deductible plans in some states. With these plans you must pay coinsurance, copayments, and deductibles up to the the deductible amount, which is $2,370 in 2021—up $30 from 2020.

Once you reach the deductible, the plan covers any costs for Medicare-approved services. Because of potentially high out-of-pocket costs, the premiums are typically much lower than for the standard Plan F or G options.

Medicare Part C (Medicare Advantage)

Medicare Advantage Plans (Part C) are a type of Medicare offered by private companies that contract with Medicare to provide all your Part A, B, and D (drug) benefits. Most of these plans also offer some attractive extras such as dental, vision, and hearing.

Medicare Advantage plans typically provide more benefits with lower premiums. The downside is that MA plans require you to choose “in network” providers. If you go outside the plan’s network or geographical area, you may pay more or not have coverage at all.

For 2021, CMS says Medicare Advantage monthly premiums have dropped to historic lows, averaging 34.2% lower than in 2017. Plan options are up 76.6% over 2017 with about 2,100 more plans to choose from. In addition, many Medicare Advantage plans are participating in the Part D Senior Savings Model for 2021, which offers insulin at no more than a $35 monthly copay. Moreover, some Medicare Advantage plans now offer coverage for end-stage renal disease (ESRD). 

Medicare Part D (Prescription Drugs)

Medicare offers two ways to get prescription drug coverage—through Medicare Advantage (see above) and through a Part D Prescription Drug plan.

One of the changes for 2021 allows seniors to choose a Part D plan that offers insulin at no more than $35 per month as part of the Part D Senior Savings Model. 

The table below outlines basic coverage provided by each type of Medicare plan.

Plan Type Hospital Medical Drugs Extras Network
Original Medicare (Parts A & B) Yes (A) Yes (B) Limited No No
Medigap Supplemental Yes (A) Yes (B) No Limited No
Prescription Drug (Part D) No No Yes No Yes
Medicare Advantage (Part C) Yes Yes Yes Yes Yes

Part D Donut Hole

The "donut hole" closed for all drugs in 2020, so you now pay a smaller percentage of the costs of your drugs than you had to in the past. Even though the donut hole has technically closed, you still pay more for prescription drugs during the coverage gap in your Part D plan.

For 2021, this coverage gap starts when you and your drug plan have spent $4,130 on covered drugs. Once you reach this level, you'll pay no more than 25% of the cost for covered drugs (brand-name and generic), whether you buy your prescriptions at a pharmacy or online. Before the donut hole closed, you paid a higher percentage.

While you pay up to 25% of costs during the coverage gap, almost the full price of your prescriptions count as out-of-pocket costs. This helps you get through the coverage gap faster. Once you reach your 2021 out-of-pocket maximum for covered drugs ($6,550), you enter the catastrophic coverage phase, in which you pay only a small coinsurance or copayment for covered drugs for the rest of the year.

2021 Premiums and Deductibles

Most of the premiums, deductibles, and coinsurance amounts for the different Medicare Parts have changed. The new amounts for 2021 are:

  2021 Medicare Costs
Part A Premium Free for most people. If you buy Part A, it costs $259 or $471, depending on how many months of Medicare taxes you've paid
Part A Deductible and Coinsurance $1,484 deductible for each benefit period
Days 1-60: $0 coinsurance for each benefit period
Days 61-90: $371 coinsurance per day of each benefit period 
Days 91 and beyond: $742 coinsurance per each "lifetime reserve day" after day 90 for each benefit period (up to a lifetime maximum of 60 days)
Beyond lifetime reserve days: All costs
 
Part B Premium $148.50 or higher, depending on your income
Part B Deductible and Coinsurance $203. After you meet your deductible, you pay 20% of the Medicare-approved amount for covered services
Part C Premium The monthly premium varies by plan
Part D Premium  The monthly premium varies by plan

COVID-19 and Medicare Waivers

In addition to new premium, deductible, and coinsurance amounts, the COVID-19 pandemic led to some unplanned Medicare changes for 2020 that will likely continue into 2021 or whenever the pandemic ends.

These waivers include but are not limited to:

  • Increased flexibility for Medicare to cover telehealth services.
  • Authorization for Medicare certification for home health services by physician assistants, nurse practitioners, and certified nurse specialists.
  • Increased Medicare payments for COVID-19-related hospital stays and durable medical equipment.

A complete list of Medicare waivers is available as a pdf file through CMS.

The Bottom Line

Familiarize yourself with the changes listed above and watch for changes in the works for 2022 and beyond, including plans to mandate lower drug prices and offer even more services to Medicare beneficiaries.