What’s Behind the 2020 Medicare Part B Premium Sticker Shock?

Medicare Part B documents

The surprisingly big jump in Medicare Part B premiums for 2022 reflects the exorbitant cost of a controversial Alzheimer’s drug. The premium hike will put more of a burden on Social Security’s recently increased cost-of-living allowance, which has risen to $92 a month for the average retired worker. If you’re wondering how to pay for health care after retirement, consider working with a financial advisor.

How we got here

In June 2021, the Food and Drug Administration, using its “accelerated approval pathway,” green-lighted the use of Aduhelm, a $56,000-a-year Alzheimer’s drug made by Swiss pharmaceutical company Biogen. Alzheimer’s, a progressive brain disorder, affects approximately 50 million worldwide. No medical treatment has been found to actually cure the condition.

The move went down well on Wall Street as Biogen’s share price jumped 31% on the news. But the move hasn’t gone down so well with many in the medical and public health community questioning Aduhelm’s effectiveness. Three FDA advisers resigned in protest.

The FDA’s move is likely to be extremely costly for Medicare. The Kaiser Family Foundation in July said it conservatively estimated the cost to Medicare of Aduhelm at $29 billion a year, based on 500,000 Medicare patients receiving the new drug. For perspective, total Medicare spending on all prescription drugs in 2019 was $37 billion.

The reason for sticker shock

Retired on TV with his doctor

Retired on TV with his doctor

As recently as August, the Medicare Trustees report had predicted a smaller increase of $10, or 6.7%, from the current $148.50. Medicare Part B covers physician services, hospital outpatient services, certain home health services, durable medical equipment, and certain other medical and health care services not covered by Medicare Part A.

Then, on November 12, the Centers for Medicare & Medicaid Services (CMS) released the 2022 Part A and B premiums, deductibles, and coinsurance amounts, as well as the 2022 Part D monthly adjustment amounts related to the income.

CMS said it was raising the standard monthly premium in 2022 to $170.10 from $148.50 in 2021 – a 14.55% jump and more than double what was expected. This is one of the largest increases in outpatient insurance premiums in dollar terms. However, most people with Medicare will still see a significant net increase in their Social Security benefits. For example, a retired worker currently receiving $1,565 per month from Social Security can expect to receive a net increase of $70.40 more per month after subtracting the Medicare Part B premium.

There were other hikes: ThThe discount fell 14.8%, or $30, to $233. Finally, the Part A deductible jumped $72 to $1,556.

Aduhelm was blamed for the unpleasant surprise. “There is significant uncertainty regarding the ability to provide future coverage for clinician-administered Alzheimer’s drugs (ie, Aduhelm), which require additional emergency reserves,” CMS said when it announced the premium increase. “Potential Medicare drug coverage is currently the subject of a Medicare National Coverage Determination (NCD) analysis, which, if covered, could increase Medicare spending. The proposed NCD for Aduhelm (as well as any drugs in this class) has not yet been determined.’

In addition to Aduhelm, CMS gave two other reasons for the premium increase: Higher health care costs attributed to care for COVID-19 and compensation for the unusually low Part B premium increase — just $3 — in 2021. something that Congress mandated because of the pandemic. Congress also directed CMS to offset this lower premium with an increase in 2022.

The result

US Capitol

US Capitol

There may be repercussions in Washington for the Part B premium increase. On November 2, President Biden proposed authorizing Medicare to negotiate prices for high-cost prescription drugs. “This will include drugs that seniors get over the counter (through Medicare Part D) and drugs that are dispensed in a doctor’s office (through Medicare Part B),” a White House statement on the Build Back Act said. Better by Biden.

But it’s unclear whether that provision will be included in a final version of the Build Back Better Act as progressives and activists like AARP negotiate with moderates and Republicans over the bill’s various spending proposals. The 2022 Part B premium sticker shock may have emboldened activists as they urge lawmakers to authorize Medicare to negotiate drug prices by including it in the Build Back Better Act.

“Once again, American seniors and taxpayers will pay the price for big drug companies’ outrageous pricing behavior,” said Bill Sweeney, AARP senior vice president of government affairs. “When Big Pharma sets a high drug price, everyone pays it – not just those who need the drugs. That’s why Congress must act quickly to pass prescription drug reforms in the Build Back Better Act that would bring substantial, much-needed relief to seniors and all Americans.”


The standard monthly Medicare Part B premium in 2022 rose to $170.10 from $148.50 in 2021 – a 14.55% jump and more than double what was expected. However, most people with Medicare will still receive more Social Security benefits. For example, a retired worker receiving $1,565 per month from Social Security will actually receive a net increase of $70.40 more per month after deducting the recently increased Medicare Part B premium. The premium increase can add to the pressure to lawmakers, engaged in horse-trading over details of Biden’s spending plans, to give Medicare the right to negotiate high-priced drugs like Aduhelm.

Health care advice

  • Consider working with a financial advisor as you seek to make sure you can meet your health care needs in retirement. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisors at no cost to decide who is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

  • Since health care costs are a big part of retirement expenses, it’s important to know what your financial resources are or will be when it’s time to retire. To find out, use our free retirement calculator.

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