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The furor over rising Medicare Part B costs

Premiums and deductibles were projected to spike by 52 percent for 2016; ultimately increased by 16 percent, but only for some enrollees

EDIT, November 20, 2016: The COLA for 2017 is only 0.3 percent, so the problem described in this article presented itself again for 2017, although not as dramatically. The 2017 COLA does allow for a slight increase (about 4 percent) in Part B premiums for most enrollees. For about 70 percent of enrollees (those who are “held harmless” just as they were in 2016), the average increase in Part B premiums will only be a little more than $4/month. For enrollees not “held harmless,” the standard premium in 2017 is $134/month, which is a 10 percent increase. But there will be a variety of different premiums in 2017, that will depend on various factors. 

EDIT, November 10, 2015: President Obama signed a budget bill on November 2 that includes a loan from the Treasury’s general fund to the Medicare Trust Fund. The result is that premiums will increase by a little more than 16 percent – instead of 52 percent – for the seven million Medicare Part B beneficiaries who are facing rate hikes in 2016. On November 10, CMS announced that the 2016 Part B premium will be $121.80/month for the 30 percent of enrollees who are not “held harmless” by the lack of a Social Security cost of living adjustment. As expected, there will also be a $3/month surcharge to pay back the Treasury loan.

The higher premiums and $3 surcharge are expected to apply to all enrollees starting in 2017, assuming there’s a cost-of-living adjustment to Social Security checks (higher income enrollees will pay a higher surcharge, starting in 2016). The deductible for all Part B enrollees will be $166/month, instead of the $223/month that has previously been projected. For high-income seniors, the Part B premium will range from $170.50/month to $389.80/month – significantly lower than what had previously been projected for this group).

The initial scare

Last week, my father-in-law called me, alarmed about news reports of an impending increase in Medicare Part B premiums and deductibles – and wondering whether he would be caught in the crosshairs.

He had good reason to wonder. The Medicare Trustees Report for 2015 noted that Part B expenses are increasing, and total premiums collected will have to rise commensurately.

As a result, the new Part B premium is expected to increase by 52 percent, to $159.30/month in 2016. (For the past three years, it’s been $104.90/month.) The Part B deductible that many enrollees pay will also increase in line with premiums. (It’s been $147 for the past three years, but it’s expected to be $223 in 2016 – a 52 percent increase.)

It’s no surprise then, that there’s a growing murmur of apprehension from seniors across the country – and that’s turning into a call for action from many senior advocates.

Some good news first

There clearly is reason for concern, but let me preface it by noting some good news: that fully 86 percent of Medicare beneficiaries will be protected from having to pay higher Part B premiums in 2016.

The higher premiums will not apply to 70 percent of Part B enrollees: those with income under $85,000/year, who are receiving Social Security checks. And while they technically will apply to low-income Medicare enrollees who are also covered by Medicaid or a Medicare Savings Program, those enrollees will be insulated from the rate hikes. I explain who’s protected and why in more detail here.

Good news is also bad news

But the good news that higher premiums wouldn’t apply to 70 percent of Part B enrollees also means that the full amount of the increase must be spread across just 30 percent of enrollees, resulting in much higher premiums for those folks.

That 30 percent includes almost 11 million dual-eligible enrollees who are covered by Medicaid in addition to Medicare. (The good news for them is that state Medicaid programs will pay the higher Part B premiums in 2016.)

The really bad news: unless Congress intervenes, about 7 million Medicare beneficiaries will likely see a 52 percent increase in their Part B premiums next year, according to Kaiser Family Foundation’s Tricia Neuman. That premium increase will amount to $653 per person over the course of the year. Worse still, the Part B deductible will be $76 higher next year, so enrollees who don’t have supplemental coverage that pays their deductible will face an overall cost increase of $729 in 2016.

The financial hit

The 7 million who will pay higher premiums consist of four groups, including some 2.9 million considered high-income – individuals with incomes over $85,000 and married couples with incomes over $170,000. They’ll see a 52 percent increase in premiums, and they’re not protected from it, despite the fact that many of them are also receiving Social Security checks. That means monthly Part B premiums for an individual with income over $85,000 will range from about $223 to $511 next year. On the high end, that amounts to a $2,100 premium increase.

But while high-income seniors will see the largest actual dollar increases in Part B premiums, lower-income enrollees are still more likely to experience a financial hardship as a result of the higher premiums. Half of all Medicare enrollees have per capita incomes below $24,150. And according to Joe Baker, President of the Medicare Rights Center, they’re already spending at least 15 percent of their income on medical costs.

Although low-income seniors (up to 135 percent of the federal poverty level) are eligible for lower premiums and out-of-pocket costs through Medicaid coverage and Medicare Savings Programs (MSP), many seniors who are eligible for an MSP aren’t enrolled. They are already paying their own Part B premiums out of their Social Security checks, and the increased Part B premiums will be particularly onerous for them next year. (Your State Health Insurance Assistance Program can help you determine if you’re eligible for a Medicare Savings Program).

The second problem is that although dual eligible enrollees will not see an increase in costs, it’s estimated that the premium increase could cost state Medicaid programs up to $2.3 billion. Arizona officials have said they will begin denying new applications for their Qualified Individual (QI) Medicare Savings Program in order to mitigate the financial risk for their Medicaid program. (For people with household income between 120 percent and 135 percent of the poverty level, the QI program uses Medicaid funds to pay enrollees’ Medicare Part B premiums).

A Congressional fix?

On the surface, it would appear that supporting legislation to help Medicare beneficiaries would be personal for Congress. Thirty-eight of the 100 senators are 65 or older, and 110 of the 435 Representatives in the House are 65 or older (as of this writing). Yet they all earn at least $174,000 per year; their constituents need to remind them that more than half of Medicare beneficiaries live on less than a seventh of that.

In early October, Sen. Ron Wyden introduced S.2148, and Rep. Dina Titus introduced H.R.3696. Both bills would eliminate premium and deductible increases for all Part B enrollees in 2016. The Obama Administration has urged Congress to mitigate the cost increases for Part B enrollees, and so has the National Governors Association.

It’s possible that Congress will fix the problem, but it could cost up to $12 billion, and the legislation that’s been introduced did not include any funding mechanisms. ($12 billion to prevent a premium and deductible increase for Part B beneficiaries sounds like a lot, until you consider the fact that it’s just one percent of the federal government’s discretionary spending in 2015.)

Lawmakers could fix this if they wanted to, but will they? A significant number of GOP lawmakers and the GOP presidential candidates believe instead that we should privatize Medicare. If that were to happen, cost-shifting onto beneficiaries would become routine, just as it has in the under-65 insurance market.

Instead of letting our elected representatives push us towards a privatized Medicare system, we should be contacting our Congressional representatives and insisting that they do whatever is necessary to ward off the cost increases that will otherwise hit 7 million Americans next year.

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