Q: Who will be exempt from the bulk of the Medicare Part B premium increase?
A: Medicare Part B premiums are increasing for 2017, but most enrollees will see only a very small increase. The same basic thing happened for 2016, except there was no increase at all in 2016 for the majority of enrollees.
For Medicare beneficiaries who are not “held harmless” (ie, protected from having a lower Social Security check than they had the year before), Part B premiums will rise by about 10 percent in 2017. This is a smaller increase than previously projected, as CMS used “statutory authority to mitigate projected premium increases for these beneficiaries.”
For beneficiaries who are “held harmless,” the increase in Part B premiums will be about 4 percent. But since the money is taken directly out of their Social Security checks, the cost of living adjustment (COLA) in their Social Security checks will cover the higher Part B premium, and they’ll end up with Social Security checks that are exactly the same as they were in 2016.
How it worked in 2016
For beneficiaries who were not “held harmless” for 2016, premiums for Part B increased by about 16 percent over 2015 rates (which was substantially lower than the 52 percent increase that would have taken effect if Congress hadn’t taken action in late 2015 to prevent it).
So as of 2016, the standard Medicare Part B premium is $121.80/month. But about 70 percent of enrollees are only paying $104.90, because they were “held harmless” from the rate hike in 2016.
How it will work in 2017
The same “hold harmless” provision will mean that the 10 percent rate increase for 2017 (from $121.80/month to $134/month) will only apply to about 30 percent of Medicare enrollees. The other 70 percent will be paying about $109/month (up from $104.90/month in 2016).
Here’s why most seniors will be paying $109/month in 2017, instead of $134:
Roughly 70 percent of Part B enrollees have their premiums deducted from their Social Security check each month, and do not have incomes in excess of $85,000/year ($170,000/year for a married couple). Those enrollees are protected by the “hold harmless” provision that prevents Social Security checks from being lower than they were in the previous year, regardless of other factors.
The “hold harmless” provision
In most years, Social Security’s cost-of-living adjustment (COLA) results in a large enough increase that higher Part B premiums can be deducted from the new payments without ending up with Social Security checks that are lower than the previous year. (If your check is $1,500 and your Part B premium is $105, the premium could rise to $125 as long as the COLA is large enough to increase the Social Security check to at least $1,520, making the net check no smaller than it was the prior year.)
But in 2016, there was no COLA, which was only the third time in 40 years that the COLA was zero. So for most Medicare beneficiaries, that prevented an increase in Part B premiums for 2016, since there was no COLA to offset a larger Part B premium being deducted from their Social Security checks.
And for 2017, the COLA is only 0.3 percent. That amounts to a little more than $4/month for the average Social Security recipient. Since Social Security checks can’t be smaller in 2017 than they were in 2016, Part B premiums that are deducted from Social Security checks can’t increase by more than the amount of the COLA increase.
So for most Medicare beneficiaries, Part B premiums can only rise by a little more than $4/month for 2017, putting the average premium up to $109/month. But exact premiums will vary based on how much a beneficiary is receiving in Social Security. The 0.3 percent COLA applies to all Social Security recipients, but those with larger Social Security checks will have a COLA increase that has a dollar amount greater than $4. For those folks, Medicare Part B premiums will be higher than $109/month in 2017 — the only requirement is that their Social Security checks can’t be lower than they were in 2017.
As a result of the “hold harmless” limitations on most seniors’ Part B premiums, however, the full amount of the increase needed for 2017 ends up being spread across the 30 percent of enrollees who aren’t “held harmless:”
- People who are new to Medicare for 2017
- People who aren’t receiving Social Security checks
- People who pay higher premiums for Medicare as a result of having high incomes.
What if I was new to Medicare in 2016?
If you were new to Medicare in 2016, you were most likely charged the standard $121.80/month, since the “hold harmless” provision didn’t apply to you.
But for 2017, you’re no longer new to Medicare, so as long as you don’t fit into one of the other categories that’s not held harmless (ie, higher-income, or not receiving Social Security checks), you’ll be protected from the brunt of the increase in 2017. Your premiums will increase by an average of about 4 percent over the $121.80/month you were paying in 2016, but they won’t increase by more than the COLA that applies to your Social Security check.