Part B premiums to fly high for 30 percent of enrollees

Part B premiums could rise as high as 52 percent for 7 million Americans in 2016. The jump in premiums is due to a provision in the Social Security Act (SSA) related to the cost-of-living adjustments (COLA) for Social Security benefits. Because the COLA is not expected to result in an increase in Social Security benefits in 2016 and will subsequently limit the increase the Part B premiums of Social Security recipients, about 30 percent of Medicare beneficiaries—those that don’t receive Social Security or pay a higher income-related premium—will have to cover the difference with increases of their own premiums.

COLA

The Social Security program uses a Consumer Price Index (CPI) to determine the COLA each year. Estimates suggest that, in 2016, the CPI is not expected to increase in the base period used to determine the COLA. The lack of a COLA affects the Medicare program because, under the SSA, a hold harmless provision mandates that the cost of higher Medicare Part B premiums cannot be passed on to Social Security recipients who do not get a raise in their Social Security benefits. Thus, when the Part B premium is adjusted upward to account for an increase in Part B per capita expenditures, 70 percent of Part B enrollees are unaffected because the hold harmless provision prohibits any increase in their premiums. However, because the Part B premium needs to rise to account for the increase in per capita expenditures, the remaining 30 percent of Part B enrollees—those not eligible for the hold harmless provision—are obligated to shoulder the cost.

Costs

For the 70 percent of unaffected beneficiaries, 2016 will be much like 2015, and enrollees will pay $104.90 per month for their Medicare Part B premium. For the other 30 percent, premiums could rise to $159.30 per month ($318.60 for married couples). Depending on incomes, for individuals whose incomes exceed certain thresholds, premiums could rise from $223.00 per month up to $509.80 (or $446 to $1,019.60 for married couples).

Those affected

The beneficiaries affected by the higher Part B premiums include: (1) individuals who enroll in Part B for the first time in 2016, (2) enrollees who do not receive a Social Security benefit, (3) beneficiaries who are directly billed for their Part B premium, (4) current enrollees who pay an income-related higher premium, and (5) dual Medicare-Medicaid beneficiaries premiums are paid by Medicaid. Because eligibility is determined by those individuals who receive Social Security benefits and Medicare in November and December of the previous year, in order to increase the likelihood of being considered eligible for the hold harmless provision, individuals who could apply for Medicare immediately and who are going to start Social Security benefits in the next year should consider applying now.