Medicare costs set to rise in 2013

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(MoneyWatch) The federal Centers for Medicare & Medicaid Services recently announced modest increases in 2013 premiums and deductibles for Medicare, as follows:

- The monthly Medicare Part B premium for most retirees will increase by 5 percent, from $99.90 in 2012 to $104.90 in 2013. This premium is required if you want to receive Part B coverage, which pays for physicians and other outpatient services. Retirees with high incomes (adjusted gross incomes of $85,000 for single taxpayers, $170,000 for married filing jointly) pay higher premiums. The good news is that the 2013 Medicare Part B premium is lower than the projected rate of $109 per month for 2013 and even lower than the 2011 premium for new retirees, which dropped from $115.40 in 2011 to $99.90 in 2012. (Note: The $5 increase in the Medicare Part B premium eats up a small portion of the modest 2013 Social Security cost of living adjustment of 1.7 percent, which will average out to about $21 per month.)

- The Medicare Part B annual deductible will increase by 5 percent, from $140 in 2012 to $147 in 2013.

- Deductibles for Part A hospital insurance will increase by 2.4 percent. For each 60-day stay in the hospital, the deductible will increase from $1,156 currently to $1,184 in 2013. For each day someone stays in the hospital after 60 days, the deductible will increase from $289 to $296 in 2013.

- No premium is charged for Medicare Part A coverage for hospital and in-patient services for workers and their families who paid into Medicare for at least 10 years. If you didn't pay into Medicare for 10 years, you can purchase Medicare Part A coverage for a monthly premium; this premium will actually decrease from its current rate of $451 per month to $441 per month in 2013.

The cost of premiums for Medicare Part C (Medicare Advantage plans) and Part D (prescription drugs) is set based on charges applied by the insurance companies that sponsor these plans and on the plans' specific features. 

The changes in Medicare's premiums and deductibles result from anticipated changes in the costs of the different in-patient and out-patient coverages. The modest increases in deductibles and copayments indicate that cost-control measures adopted by Medicare in recent years are working.

Look for even more changes that will help rein in costs, since Medicare is on the table during the "fiscal cliff"budget talks.

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    Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops and authored Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck and Recession-Proof Your Retirement Years.

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