Tuesday, October 20, 2015

2016 Social Security Payments Unchanged; Medicare Part B Premiums to Balloon for Millions; Deductibles to Rise

[Update: The Medicare Premium and Deductible increases discussed in the article below have been modified by the Bipartisan Budget Act of 2015.” See my blog post New Budget Law Impacts Medicare and Social Security for more information. JM]

The Social Security Administration has announced that there will be no automatic increase in monthly Social Security and Supplemental Security Income (SSI) benefits for nearly 65 million Americans in 2016. The lack of a cost of living adjustment next year is a result of a lack of inflation over the past year in the index used by Social Security.   
Social Security is the major source of income for most of the elderly. The Social Security Administration reports that:
  •    Nine out of ten individuals age 65 and older receive Social Security benefits.
  •    Social Security benefits represent about 39% of the income of the elderly.
  •    Among elderly Social Security beneficiaries, 53% of married couples and 74% of unmarried persons receive 50% or more of their income from Social Security.
  •    Among elderly Social Security beneficiaries, 22% of married couples and about 47% of unmarried persons rely on Social Security for 90% or more of their income. 
No Increase in Social Security Benefits
The estimated average Social Security benefit payable in 2016 to all retired workers will be $1,341. The estimated average for an aged couple where both are receiving benefits will be $2,212. 
The maximum Social Security benefit for a worker retiring at full retirement age will be $2,663. (Individual benefits vary with factors such as the worker’s lifetime earnings record and age at time of claiming).   
SSI Benefits
With the lack of a cost of living adjustment the maximum federal SSI benefit for an individual will remain at $733 per month. The maximum benefit for a couple on SSI will be $1,100 per month.
Pennsylvania and many other states add to SSI benefits for their residents so that actual payments can exceed the federal maximums. The monthly payment amount is reduced by subtracting the recipient’s monthly countable income.
People who receive SSI usually qualify automatically for Medicaid benefits.
Millions Face Huge Increase in Medicare Part B Premiums
Due to a quirk in the Social Security law it appears that many seniors will be hit with gigantic increases in their Medicare Part B premiums in 2016. (Medicare Part B covers doctors’ bills.) Under the law, premiums must cover 25% of Part B costs. 
But a “hold harmless” provision in the law guarantees that most people cannot have a premium increase that is larger than the cost of living increase they receive in their monthly check. The 70 % percent of beneficiaries who are “held harmless” will pay the same premium as last year (although their deductible will increase).
The other 30% of Medicare beneficiaries are not protected by the “hold harmless” provision. This means that the entire Medicare Part B premium increase must be borne by them – the unlucky 30% of Medicare beneficiaries.   
The unfortunate 30% includes: new Medicare enrollees in 2016 (2.8 million); individuals not collecting Social Security benefits (1.6 million); and beneficiaries already paying higher, income-related premiums (3.1 million). Nine million beneficiaries dually eligible for Medicare and Medicaid are also subject to the higher premiums - state Medicaid program budgets will be forced to bear this cost.
According to the 2015 Medicare Trustees Report, Part B premiums will increase by 52% for the unlucky 30%. The trustees also predict that this increase will be accompanied by a hike in the Part B deductible—up to $223 from $147. Unlike the 2016 Part B premium projections, the estimated increase in the Part B deductible will affect all Medicare beneficiaries.
Congress can and should fix this inequity. But Congress is so dysfunctional at present that it looks like it won’t address the issue. Medicare beneficiaries should take this opportunity to let their Congressional Representatives know that their action or inaction on this issue will affect our votes in the future.
Related Reading
Social Security Changes (Social Security Administration Press Release)

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