Q: Who will be exempt from the Medicare Part B premium increase?
A: Prior to the budget bill that Congress passed on November 2, 2015, Part B premiums were set to increase by 52 percent for about 7 million Medicare enrollees in 2016. The budget bill includes a loan from the Treasury’s general fund to the Medicare Trust Fund, which means the Part B premium increase will be much less extreme. On November 10, CMS finalized the Part B premiums, deductible, and surcharges for 2016. For the 7 million Part B enrollees who will face higher premiums, the increase will be about 16 percent. The premium will be $121.80/month, plus a $3/month surcharge to pay back the Treasury loan over the next several years.
Although 16 percent is still a significant amount, the good news is that most seniors won’t see an increase in their Part B premiums. Here’s why:
Roughly 70 percent of Part B enrollees have their premiums deducted from their Social Security check each month. Those enrollees are protected by a “hold harmless” provision that prevents Social Security checks from being lower than they were in the previous year, regardless of other factors.
In most years, Social Security’s cost-of-living adjustment (COLA) results in a larger check for the coming year. That means increased 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 will be no COLA. This is only the third time in 40 years that the COLA has been zero. So for most Medicare beneficiaries, that prevents an increase in Part B premiums for 2016, since there will be no COLA to offset a larger Part B premium being deducted from their Social Security checks.
As a result, however, the full amount of the increase was going to be spread across just 30 percent of Medicare Part B enrollees, which would have resulted in a 52 percent premium hike for that group. The Treasury loan in the budget bill has helped to soften the blow for the seven million seniors who are facing a Part B rate increase next year.