Don’t Get Used to Lower Medicare Part B Premiums — Here’s Why

Don’t Get Used To Lower Medicare Part B Premiums — Here’s Why

Many retirees are probably counting down the days until their monthly Social Security check increases. And there’s even more financial help on the way. Seniors on Medicare recently received some really good news. Medicare Part B premiums will be lower in 2023 than they are in 2022.

The Social Security raise will be permanent. Benefits won’t be reduced if inflation declines next year. But don’t get used to lower Medicare Part B premiums. Here’s why.

Image source: Getty Images.

Behind the decline

It’s first important to understand why Medicare Part B premiums are coming down. The story actually begins with the huge premium increase that seniors experienced this year.

Medicare Part B premiums rose by 14.5% in 2022. That was one of the biggest increases in the history of the Medicare program. The Centers for Medicare and Medicaid Services (CMS) identified several reasons for the jump, but one was especially noteworthy.

CMS raised Medicare Part B premiums in part because of possible high costs related to Aduhelm, an Alzheimer’s disease drug developed by Biogen (NASDAQ: BIIB). Aduhelm won U.S. Food and Drug Administration (FDA) accelerated approval in June 2021.

However, CMS announced in April 2022 that it wouldn’t pay for Aduhelm except for the use of the drug by Medicare beneficiaries in clinical studies. The higher anticipated costs related to the drug, therefore, didn’t materialize.

As a direct result of this decision, CMS reduced the Medicare Part B premiums for 2023. The standard monthly premium will fall from $170.10 to $164.90.

Biogen’s second act

But Aduhelm isn’t Biogen’s only program targeting Alzheimer’s disease. Last month, Biogen and its partner, Eisai (OTC: ESALY), announced positive results from a late-stage clinical study of lecanemab.

Like Aduhelm, lecanemab is a monoclonal antibody targeting amyloid-beta plaque to treat Alzheimer’s disease. Unlike Aduhelm, though, the experimental drug appeared to conclusively slow the progression of the disease in a large-scale clinical study.

Some analysts projected $10 billion in peak annual sales for Aduhelm after the FDA granted accelerated approval to the drug last year. The estimates for lecanemab are in the same ballpark, typically ranging from $6 billion to $10 billion.

The FDA could give a thumbs-up to lecanemab through its accelerated approval pathway as early as Jan. 6, 2023. However, CMS’ policy decision with Aduhelm was to only provide full reimbursement for monoclonal antibodies targeting beta-amyloid to treat Alzheimer’s disease when they secure traditional FDA approval rather than accelerated approval.

Eisai plans to file for traditional FDA approval of lecanemab by March 31, 2023. It’s possible the drug could win this U.S. approval late next year. If so, CMS could be in a position where it feels the need to significantly increase Medicare Part B premiums for 2024 along the lines of its 2022 increase.

A temporary reprieve

There could be even higher costs for CMS related to other Alzheimer’s disease drugs. Eli Lilly and Roche hope to follow in the footsteps of Biogen’s and Eisai’s path with lecanemab. Both big pharma companies could win FDA accelerated approvals for their respective Alzheimer’s disease candidates next year.

New Alzheimer’s disease drugs aren’t the only issue for Medicare. The overall costs of healthcare in retirement also continue to rise. The bottom line for seniors is that the lower Medicare Part B premiums in 2023 will almost certainly be only a temporary reprieve.

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Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Biogen. The Motley Fool has a disclosure policy.