No one likes an unexpected increase in payments. And when health care costs already consume close to 20% of seniors’ annual income, an increase in health care premiums and/or deductibles is not welcome news. While the estimated costs have not yet been formally adopted, the projected 2016 increase for Medicare’s Part B premium and deductible is 52%. That’s an increase from $104.90 to $159.30 per month for the Part B premium that would affect nearly 1/3 of all Medicare beneficiaries, or 16 million people, and an increase from $147 to $223 for the Part B annual deductible that would affect most Medicare beneficiaries with Original Medicare.
Why such high premium and deductible increase?
Medicare’s Part B premium and deductible increases are the result of the interaction of various Medicare and Social Security rules. By law, 25% of Medicare’s Part B costs are to be paid by beneficiaries. Yet, for most beneficiaries, the Part B premium can only increase as much as the COLA (cost of living adjustment) for the coming year. This is because of the “hold harmless” provision in Medicare law. In 2016, however, as in some years in the past, a 0% COLA is projected. This means that the 70% of beneficiaries protected under the hold harmless provision would not be allowed to have any increase in their 2016 Part B premium. Because Medicare must still have 25% of its Part B costs covered by beneficiaries, the biggest burden of the cost falls on the roughly 30% of beneficiaries not protected under the “hold harmless” provision. They would see a 52% increase in their Part B premium.
What’s the hold harmless provision? Who is not protected by it?
People who are on Medicare and have claimed their Social Security benefits must, by law, have their Part B premiums withheld from their monthly Social Security checks. The hold harmless provision mandates that Social Security benefits cannot decline from one year to the next. Normally this is not a problem for Medicare, as each October the new COLA is announced for the coming year and Medicare raises its Part B premiums accordingly. With a 0% COLA projected, the 30% of beneficiaries not protected by the hold harmless provision who shoulder the burden of the cost include:
- People new to Medicare and whose Medicare Part B premiums have not been taken out of their Social Security checks for at least the last 2 months of the year before the increase (so in November and December of 2015) and/or are not yet receiving Social Security benefits. These beneficiaries’ premiums would rise from $104.90 in 2015 to $159.30 in 2016.
- People with higher incomes (modified adjusted gross income greater than $85,000 for individuals and $170,000 for couples). Their premiums that have ranged from $146.90 to $335.70 a month in 2015 will increase sharply to a range of $223 to $509.80 in 2016.
- Beneficiaries whose Part B premiums are paid by the state through one of the Medicare Savings Programs (MSPs). These MSPs include the Qualified Medicare Beneficiary, Specified Low-Income Medicare Beneficiary, and Qualified Individual programs.
Who is affected by the projected Part B deductible increase?
People with Original Medicare would be hit the most by this 52% deductible increase, except for those with Medigap plans C and F, which pay that deductible. Those who are in Medicare Advantage plans would likely see little or no direct impact from the project Part B deductible increase. Medicare Advantage plans can set their own deductibles, and many do not charge one at all.
What can you do about the projected Part B cost increases?