Tuesday, August 11, 2015

Medicare Premium May Jump 52% for Millions of Seniors

Many seniors may see a 52% jump in their Medicare Part B premiums next year. Medicare provides health insurance coverage for approximately 54 million people. The increase could impact approximately 30% of Medicare beneficiaries including those who:
   (1) do not have their Part B premiums withheld from their Social Security checks, or
   (2) pay a higher Part B premium surcharge based on high income, or
   (3) are newly enrolled in Part B, or
   (4) are eligible for both Medicare and Medicaid.
The potential increase is noted in the annual Medicare Trustees report for 2015. The projected increase would take the standard Medicare Part B premium from $104.90 to $159.30 in 2016. This is a spike of $54.40 a month. Higher income beneficiaries who pay a premium surcharge would pay even more.
The increases have nothing to do with Obamacare. Instead, they result from a long-standing “hold harmless” provision in Social Security law [42 U.S.C. § 1395r(f)] which was enacted in 1988. This law limits the dollar increase in Part B premiums to the dollar increase an individual receives in their Social Security benefit. But, the impacted groups noted above are excluded from the protections of this “hold harmless” law.
The Medicare Trustees report that they anticipate no increase in the Social Security cost of living adjustment (COLA) next year due to recently low general inflation.  On the other hand, Part B program costs (which generally cover physician and outpatient services) have been increasing much more rapidly than general inflation.
This means that 70% of Medicare beneficiaries should see no increase in their Part B premiums. But since the hold harmless provision doesn’t protect the other 30% of Medicare recipients they will have to bear the full brunt of Medicare Part B program cost increases next year.
In other words, if most Medicare Part B beneficiaries do not have to pay for the Part B cost increases in 2016 the beneficiaries who do will see huge increases in their premiums.
Here is how Kaiser Health News describes the problem.   
The huge rate hike is predicted because of a confluence of two factors: Medicare Part B costs increased more than expected last year, and Social Security is not expected to have a cost of living increase next year. By law, the cost of higher Medicare Part B premiums can’t be passed on to most Medicare beneficiaries when they don’t get a Social Security raise. As a result, the higher Medicare costs have to be covered by just 30 percent of Medicare beneficiaries.
Higher income individuals may have to pay as much as $174 more each month. As reported by the Wall Street Journal:
The largest single group of people affected are the 3.1 million participants subject to higher Part B premiums because their incomes are above $85,000 (or $170,000 for couples). Within this group, the trustees projected that single individuals earning up to $107,000 (and couples earning up to $214,000) would have their 2016 monthly premiums rise from $146.90 a person this year to $223 in 2016. For those earning more than $214,000 (or $428,000 for couples), the projected increase is to $509.80 a month, from $335.70 in 2015.
It’s important to note that the 2016 rates will not be formally set until October. And Health and Human Services Secretary Sylvia Burwell may decide to take some as yet undetermined action to modify the increases.
Further Reading
Good News, Bad News In Medicare Trustees Report, Kaiser Health News, July 23, 2015
An Unexpected Spike for Medicare Premiums? Anne Tergesen, Wall Street Journal, July 31, 2015

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