Medicare Premiums, Inflation Create Affordability Challenges

Medicare beneficiaries are experiencing healthcare affordability challenges in 2022 due to Medicare Part B premiums and inflation, according to a MedicarePlans.com survey.

Pollfish surveyed 1,250 adults past the age of Medicare eligibility. The survey was conducted online from February 11 through February 12, 2022.

The survey found that Medicare beneficiaries are experiencing two sources of pressure in 2022: inflation and the Medicare Part B premium hike.

Although Medicare Advantage premiums dropped for 2022, Medicare Part D and Medicare Part B premiums saw significant increases. CMS blamed rising prices, significant decreases in the 2021 Medicare Part B premium, and contingency reserves for a controversial Alzheimer's drug for creating the highest Medicare Part B premium hike in recorded history.

“Most years, we expect a Medicare price increase, but in 2021, that increase was limited by the CARES Act in response to the COVID-19 pandemic. Now, the Centers for Medicare and Medicaid Services is playing catch-up,” explained Kelly Blackwell, senior advisor at MedicarePlans.com.

Medicare beneficiaries are feeling the impact, according to the MedicarePlans.com survey. Nearly one in five Medicare beneficiaries (18 percent) say that covering healthcare costs will be “very difficult.”

One in five Medicare beneficiaries said that they spend half or more than half of their monthly incomes on healthcare expenses. Those healthcare expenses include premiums, prescription drugs, and other costs not covered through fee-for-service Medicare. However, for over a quarter of Medicare recipients, Medicare premiums were their highest healthcare costs.

More than two-thirds of respondents with an income of less than $50,000 (65 percent) indicated that healthcare would be “somewhat difficult” or “very difficult” to afford in 2022. Even among individuals with an annual income of $100,000 or higher, 51 percent said it would be “somewhat difficult” or “very difficult” to afford healthcare.

Given the steep costs and widespread challenges, it may come as no surprise that half of those feeling the pressures of high healthcare costs are expected to respond by foregoing care in 2022.

Beneficiaries are most likely to forego services and procedures that do not fall under Medicare coverage. Primarily, most seniors expected to skip dental care or vision care, which are not covered unless seniors have Medicare supplemental plans.

However, foregoing care is not the only option for managing high healthcare expenses combined with high inflation. Three out of ten beneficiaries are reducing spending on things like groceries and utilities, while others are dipping into savings.

These costs might also influence lifestyle changes. Slightly more than half of the respondents planned to cut back on travel and entertainment expenditures. Additionally, high healthcare costs threaten to push retirees out of retirement or delay entry into retirement for other seniors.

Four in ten respondents stated that they would have no difficulty covering their healthcare needs.

Experts behind the survey suggested that switching to Medigap supplemental coverage or Medicare Advantage plans could help beneficiaries manage high costs.

For example, while original Medicare Part B and Part D premiums escalated into 2022, more Medicare Advantage plans continued adopting zero-dollar premiums. According to an eHealth survey, in the first half of the 2022 open enrollment season, nearly nine out of ten Medicare plan selections were zero-dollar premium plans.

However, despite the presence of zero-dollar premium plans, of the types of Medicare plans surveyed—including Medicare Advantage plans and Medicare Part D plan—Medigap supplement plans had the lowest likelihood of affordability barriers. 

Whereas Medicare Advantage members were most likely to have affordability concerns, under a third of beneficiaries in Medigap supplemental coverage cited out-of-pocket healthcare spending as a concern, the eHealth survey found.

As Medicare beneficiaries face high healthcare costs, payers may need to take a creative approach to lower costs for beneficiaries.