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Medicare Part B – outpatient coverage

Medical insurance picks up where Part A leaves off

  • May 18, 2016

Medicare Part B picks up – to a large extent – where Medicare Part A leaves off, covering many of the outpatient services and products not covered by the “hospital insurance.”Part B coverage pays for a broad range of medically necessary services not covered during inpatient treatment, including ambulance services, certain surgical procedures, mental health care, physical therapy, transplants, urgently needed care and more. In addition, Part B covers preventive medical services, including diagnostic tests (such as MRIs, CT scans, EKGs and x-rays) and a host of screenings (such as pap tests, HIV screening, glaucoma tests, hearing tests, diabetes screening and colorectal cancer screenings).Part B also pays the costs of durable medical equipment such as wheelchairs, hospital beds and oxygen equipment.

Is there a premium for Part B?

Yes. In 2016, most enrollees still pay $104.90/month, unchanged from the previous three years. This includes everyone who was already enrolled in Medicare in 2015, as long as they earn less than $85,000 and are also receiving Social Security.

But people with income below $85,000 who are newly-enrolled in Medicare in 2016 are paying $121.80/month in 2016, plus a $3 surcharge for Medicare Part B.

So are Medicare beneficiaries who pay their Part B premium directly, rather than having it withheld from their Social Security check (either because they paid into a different retirement system in lieu of Social Security, or because they have not yet elected to take Social Security).

In 2015, the Part B premium was $104.90/month for all enrollees except those with incomes above $85,000 (who pay higher premiums). Costs have increased though, and it was clear that premiums needed to increase to keep up. But there wasn’t a cost-of-living adjustment (COLA) increase in Social Security checks for 2016, and by law, Social Security checks can’t be smaller than they were the year before. That meant that a larger Part B premium could not be deducted, which is why Part B premiums have remained unchanged for about 70 percent of enrollees.

The catch was that premiums would have to rise for the other 30 percent of enrollees to make up the difference. Until Congress passed a budget agreement on November 2, 2015, it was projected that up to 8 million seniors would be paying $159.30/month for their Medicare Part B premiums in 2016. But instead, Congress agreed to provide a loan to the Medicare Trust Fund.

The result is that enrollees who are impacted by the higher premium (and who earn less than $85,000), pay $121.80 per month in 2016, plus a $3 surcharge that was added in order to begin paying back the loan. High-income seniors pay higher Part B premiums in 2016 than they did in 2015, but the budget deal also resulted in those amounts being lower than they would have otherwise been.

$121.80 is roughly the amount that the Part B premium would have been for all enrollees if there had been a COLA increase in Social Security payments. The $3 surcharge doesn’t apply to seniors whose premium remains at $104.90/month due to the hold harmless provision, but it will be added to their premiums in future years assuming there’s a COLA.

In 2017, assuming there’s a COLA, the $121.80/month and $3 surcharge will apply to all Medicare Part B enrollees with income under $85,000/year. So for seniors who will see an increase in Part B premiums in 2016, the total premium plus surcharge will be $124.80/month (high income seniors will pay higher Part B premiums in 2016 than they do in 2015, but the budget deal also resulted in those amounts being lower than they would have otherwise been).

Enrollees who receive treatment during the year must also pay a Part B deductible, which is $166 in 2016. It had been slated to increase to $223 in 2016, but the budget deal passed in November 2015 averted much of that increase, and the deductible rose from $147 to $166. Typically, Part B users also pay 20 percent of the Medicare-approved amount of medically necessary services, preventive medical services and durable medical equipment referenced above.

How do I enroll in Part B?

If you are already receiving Social Security or Railroad Retirement benefits, you will be notified three months prior to your 65th birthday that you are about to become a Part A Medicare consumer and that Part B is an option. You’ll receive the Part B card at the same time as the Part A card.

If you choose not to enroll in Part B, you must return the card or the premium will automatically be deducted from your Social Security checks. If you keep the card, Part B coverage kicks in the month you turn 65.

If you’re not already receiving Social Security or Railroad Retirement benefits, you’ll have an opportunity to enroll in Medicare B (along with Medicare A) during a seven-month window that includes the three months before the month you turn 65, the month you turn 65, and the following three months.  If you enroll in the three months prior to the month you turn 65, your coverage will be effective the month you turn 65.

It’s important to note that if you fail to enroll in Part B during your seven month enrollment period, the program will offer you another opportunity to enroll each succeeding year (January 1 – March 31). The catch?  If and when you do eventually enroll in Medicare B, for each year that you were eligible for Part B but turned it down, your monthly premium will be increased by 10 percent, and the higher rate will be in place for as long as you have Part B.

So if you wait three full years to enroll after your initial enrollment period, you’ll pay premiums that are 30 percent higher than the normal price, for as long as you have the coverage.

Delaying Part B

If you have health insurance through your employer, or through your spouse’s employer, you may want to delay enrollment in Part B. You’ll need to check with your employer or HR department to make sure that your employer-sponsored coverage will pick up where Medicare A leaves off, but assuming it does, you may want to delay enrolling in Medicare Part B, since it has a premium.

As long as you enroll in Part B either while you (or your spouse, if your coverage is through your spouse’s employer) are still employed, or within eight months of the end of employment, you’ll be able to enroll in Part B without any penalty. This is regardless of what time of year it is, and regardless of how long ago you turned 65.

If your employment ends, you may be eligible to continue your employer-sponsored coverage via COBRA. But coverage under COBRA does not have the same protections as far as access to Part B and the ability to enroll without a penalty. Once your employment ends, you’ve got eight months to sign up for Part B (regardless of what time of year it is, and without a penalty). You can have COBRA coverage during that eight months if you wish. But once it’s been more than eight months since your employment ended, you no longer have open access to Medicare Part B, even if you’re still covered under COBRA.

Once it’s been more than eight months since your employment ended, the details above about late enrollment in Part B apply. You’ll only be able to sign up for Part B between January 1 and March 31 (with coverage effective July 1), and late enrollment penalties can be applied to your premium. This is something to keep in mind if you elect COBRA once your employment ends; if your COBRA runs out in the middle of the year (and you haven’t yet enrolled in Part B) you won’t have access to Part B at that point – you’ll have to wait until the following January – March enrollment period.