Confused about Medicare?
There have been a lot of scary stories in the media lately about what could possibly happen to Medicare premiums for 2016. Is it true or just media hype? The situation in a nutshell: A recent report from the Center for Retirement Research suggests that for only the third time in 40 years, Social Security beneficiaries may not get a cost-of-living adjustment (COLA).
The reason this matters to Medicare costs? Social Security cost-of-living adjustments affect how the U.S. Department of Health and Human Services (HHS) sets the Medicare Part B premium prices for different income groups. If there is no COLA adjustment for those on Medicare who receive Social Security, a certain portion of Medicare beneficiaries may bear the burden of paying substantially higher rates for Part B, which covers doctor visits and other outpatient care.
How likely is this to happen and who will it affect? Grandparents.com spoke with Maura Carley, President and CEO of the patient advocacy firm, Healthcare Navigation, and Social Security expert, Brian Doherty, author of Getting Paid to Wait, to set the record straight.
"Nobody will know for sure until Social Security makes its announcement about the cost of living adjustment," says Carley, author of Health Insurance: Navigating Traps & Gaps. Social Security’s announcement about a cost of living adjustment is expected in late October.
Medicare Part B premiums are deducted from your monthly Social Security benefits. "Under current law, because of a 'hold harmless provision', approximately 70 percent of all Medicare beneficiaries are protected from any increases in their Medicare Part B premiums if there is no increase in Social Security COLA," says Doherty. He explains it this way: The hold harmless provision states that a recipient's Social Security benefits cannot decrease from one year to the next year. "So, if there is no COLA increase, there can be no increase in Medicare Part B premiums because that increase would decrease Social Security benefits."
The increases really affect three groups:
1) New Enrollees in 2016. Whether they take Social Security or not, new enrollees who don't have high incomes would pay Medicare premiums of $159.30 per month instead of $104.90 per month that current beneficiaries will continue to pay because of the hold harmless provision, says Doherty. That is a 52% increase in the monthly Medicare Part B premium.
2) People with Adjusted Gross Incomes above $85,000 if single, and $170,000 if filing a joint tax return. These beneficiaries pay higher premiums. In 2015 those higher premiums ranged from $146.90 - $335.70 per month. In 2016 those premiums are projected to increase to $223 - 509.80 per month. The higher your Adjusted Gross Income the higher your monthly premium. "If you are making $428,000 a year as couple or $214,000 as a single, you are at the highest Part B premium paying $335.70 per person per month as a couple. A reported projected increase would raise those premiums to $509.90 a month," says Carley. "That’s not catastrophic for this income group but it seems blatantly unfair. People expect expenses to increase but not in such an extreme way."
3) Medicare beneficiaries who pay their Medicare premiums directly to Social Security because they are not yet receiving their Social Security benefits. (In other words, people who have to fill their own Social Security account with funds that can be deducted for their Medicare premium.) This group could potentially avoid the Medicare premium increase in 2016 if they decide to claim their Social Security benefits by December 31 of 2015 and have their Medicare premiums taken from their Social Security benefits. If their Adjusted Gross Income doesn't exceed that income thresholds, they would benefit from the hold harmless provision and their Monthly Medicare Part B premium would only be $104.90 in 2016. "But for these people, deciding whether to claim they Social Security benefits in 2015, means they should weigh the benefits of a smaller Medicare Part B premium payment against the benefits of an 8% annual increase in the amount of their Social Security benefit for every year they delay claiming up to age 70," says Doherty.
One more affected group: "The states, which pay for people who are dually eligible for Medicare and Medicaid," says Carley. "The state where they live picks up that cost. That’s why I think there will be a major effort to try to come up with an approach that’s not quite as severe as what’s been publicized."
"I would be very surprised if Sylvia Mathews Burwell [Secretary of Health & Human Services] isn’t working to lessen the impact for those outside the protected group," says Carley. "She does have the ability to find a way to work around the increase in Part B premiums if it is established that there are enough reserves." In a statement at the Medicare and Social Security Spring Trustees Press Conference, Secretary Burwell said, "For all Medicare enrollees, we project per-enrollee Part B spending to increase on average under 5 percent per year over the next 10 years." Guess we'll just have to wait and see.
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