You may have heard that Medicare will be costing you a lot more in 2016, with premiums increasing perhaps over 50%. Rest assured that is not the case. In fact, it’s quite likely you will pay the same as you did in 2015. Since Social Security benefits are staying flat next year, due to a zero cost-of-living-adjustment (COLA), by law the same will be true with Medicare Part B premiums for most participants. That is because of a provision governing premiums that provides they cannot rise more than the amount a person’s Social Security benefits increase due to inflation – if total income is within limits.
Then who will be paying more in 2016? Generally, those falling in one of three categories: new Medicare enrollees, higher-earning individuals subject to income-related Medicare premiums, and certain Part B participants who do not receive Social Security benefits. All others (about 70% of total Medicare participants) who have their Part B premium automatically deducted from Social Security payments will see no increase next year. Those beneficiaries are said to be “held harmless”. The rule is to ensure Social Security checks do not decline from one year to the next.
Part B premiums in 2015 have been $104.90 monthly for most beneficiaries (married couples earning $170,000 or less; singles $85,000 or less). Those in higher income brackets are subject to additional costs resulting in monthly premiums as high as $335.70, which is over three times as much as the standard premium. Low-income recipients often qualify for assistance programs such as state Medicaid. About one in five Medicare beneficiaries receives part B premium subsidies.*
Because the “hold harmless rule” shields about 70% of Medicare recipients from premium increases in 2016, the big scare was for the remaining 30% who were set to shoulder the entire 2016 Medicare Part B rise in order to cover all the expected higher program costs. However, the recent federal budget deal eliminated two Social Security benefit claiming options and as part of the tradeoff, Medicare beneficiaries not protected by the hold-harmless provision will see their previously planned 52% premium increase lowered to roughly 18%. Thus, instead of
potentially going from $104.90 a month to about $159.30 this year, it will instead be in the neighborhood of $123.70.*
Medicare Trustees estimate in 2017 the hold-harmless provision will no longer be in effect and the standard monthly premium will decrease to about $120.70. They also project increases on average over the next decade of approximately 6% each year, which may cause some beneficiaries to see a decline in their standard of living if heavily reliant on Social Security benefits and overall inflation remains subdued.
Helpful Resources
Medicare has a phone number (800-633-4227) and website (www.medicare.gov) chock full of useful information. There are also excellent independent advisors available to help you through the Medicare maze. Just give us a call and we’ll be happy to answer your questions or steer you in the right direction.
*Sources: Social Security website ssa.gov; Congressional Research Service report, September 29, 2015; Forbes, November 2, 2015