Q: Are all Medicare beneficiaries paying higher premiums in 2018?
A: Most beneficiaries are paying higher premiums, but some are paying the same amount they paid in 2017. As was the case in 2017, premiums vary depending on the size of each person’s Social Security cost of living adjustment (COLA).
For 2017, the COLA was so small that most enrollees’ Part B premiums only increased by a little more than $4 per month. But since the COLA was larger for 2018, at 2 percent, the average premium increase was larger too. The increase in Medicare Part B premiums absorbed the full COLA for most people, so most seniors end up getting the same Social Security checks they got in 2017, after their Part B premiums are deducted.
For about 70 percent of Part B enrollees, the average premium in 2018 is about $130/month — up from about $109/month in 2017, but the increase is fully covered by the Social Security COLA. Premiums would be slightly higher if the Social Security COLA had been larger for 2018. Since Medicare Part B premiums are deducted from Social Security checks, and since there’s a “hold harmless” provision that — in most cases — prevents Social Security checks from declining from one year to the next, Part B premiums are limited to about $130/month for most enrollees.
But if your Social Security check is higher, and the COLA, therefore, added a larger amount to your check, your Part B premium will be higher than $130/month, as the standard premium is set at $134/month in 2018. But for most enrollees, the COLA for 2018 was entirely devoted to Medicare Part B premiums, and wasn’t quite large enough to bring the premiums up to the standard $134/month amount (in order to charge everyone $134/month, most people would have seen a decrease of a few dollars per month in their Social Security checks after the Part B premiums were deducted, and such a decrease is generally not allowed).
For the other 30 percent of enrollees, the standard premium is $134/month in 2018, the same as it was in 2017. Medicare enrollees with income over $85,000 ($170,000 for a couple) are among that 30 percent, but their premiums are further increased above the standard rates.
Those who are paying at least $134/month for Part B in 2018 consist of four groups:
- New enrollees, including those who enrolled in 2017. People who are newly enrolled in Medicare Part B in 2018 are paying $134/month for Part B. This is also true for people who were newly enrolled in 2017, since the standard premium that year was also $134/month. People who enrolled in 2017 were charged the standard premium that year (as opposed to the lower average premium that applied to people who were protected from the full 2017 rate increase due to the very small COLA that applied that year). For 2018, the 2 percent COLA was simply added to their Social Security check, and they were able to continue to pay $134/month for Part B, without a decrease in their Social Security check.
- Enrollees who pay higher premiums based on their income. For single enrollees whose income is higher than $85,000 (or married couples with income above $170,000), Part B premiums are higher than the standard rate. For high-income enrollees, the monthly Part B premium ranges from $187.50 to $428.60 in 2018.
- Enrollees who haven’t begun receiving Social Security checks. Some Medicare enrollees between age 65 and 70 have opted to begin receiving Social Security benefits after age 65, which means they pay Medicare directly for Part B, rather than having the premium withheld from a Social Security check. The hold harmless provision only keeps Social Security checks from declining from one year to the next — it doesn’t prevent a Part B premium from increasing if the person pays the premiums directly. People in this situation were already paying $134/month for Part B in 2017 (since they weren’t protected by the hold harmless provision that year either), and that continues to be the case in 2018.
- Enrollees who are covered under a public sector retirement program instead of Social Security. There are about 1.6 million public sector retirees who paid into a different pension system in lieu of Social Security. This includes some firefighters, police officers and teachers (about 40 percent of public school teachers are in this position), as well as government employees who are covered under the Civil Service Retirement Program. These retirees pay Part B premiums directly to Medicare, since they don’t receive a Social Security check from which the premium can be deducted. Just like people who have not yet begun to receive Social Security, this group is continuing to pay $134/month in 2018 for Part B.
But unlike 2016 and 2017, when there was a significant gap between what people paid depending on whether they were held harmless or not, the disparity in 2018 is fairly minimal: about $130/month for most people who are receiving Social Security benefits, versus $134/month for the four populations described above.
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.