Are You About to Get Hit Hard by Soaring Medicare Premiums?
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Medicare is a critical healthcare safety-net for seniors and the premiums for Medicare Part B and Part D could jump significantly in 2017. Will Medicare recipients suffer premium-itis next year? Read on to learn more about how premiums for Part B and Part D could impact you in 2017.
First, a bit of background
While Medicare Part A covers costs associated with hospitalizations for free, Medicare Part B and Part D recipients pay monthly premiums for their coverage.
Part B covers medical services and supplies necessary to diagnose or treat medical conditions and preventative services, such as doctor visits. Part D provides coverage for perscription medicine.
In 2016, the monthly premium for Part B is $121.80 or $104.90, depending on whether you qualified for the hold-harmless provision of the Bipartisan Budget Act (BBA) of 2015 (more on that in a minute). The monthly premium for Part D is an average $32.56 this year, but Part D premiums vary widely depending on the plan chosen.
Holding the line
Last year, Social Security recipients didn't get a cost-of-living increase for only the third time since 1975. The lack of a cost-of-living increase could have been a big burden on Medicare recipients because Part B premiums increased to $121.80 in 2016 from $104.90 in 2015. However, a hold-harmless provision was passed in Washington, D.C. last year that froze Part B premiums at the 2015 rate for about 70% of Part B enrollees.The hold-harmless provision didn't apply to part D premiums though.
While 70% of enrollees didn't face a hike in Part B premiums this year, the increase in Part B costs still had to be made up from somewhere, so the difference between costs and premiums was covered by transfers from the general fund that will need to be paid back in the future.
Is a Medicare sticker-shock on the horizon?
The Bipartisan Budget Act requires that beginning this year, a $3 increase in Part B premiums is to be collected and repaid to the general fund and those payments will continue until the balance that's due to the general fund is repaid.
That $3 increase, however, pales in comparison to the increase that could occur if Social Security benefits only increase slightly next year.
The hold-harmless provision of the Bipartisan Budget Act limits Part B premium increases to increases in Social Security benefits. Therefore, if Part B premiums increase more than Social Security increases, the difference this time around won't be borne by the general fund, but by the 30% of Part B enrollees who aren't covered by the hold-harmless provision. That means new enrollees, enrollees who do not receive Social Security benefit checks, enrollees with high incomes who are subject to upward premium adjustments, and dual Medicare-Medicaid beneficiaries could all get hit with a big spike in Part B premiums. Overall, Medicare's Trustees estimate that if Social Security benefits increase by a modest 0.2% next year, then monthly Part B premiums will jump "substantially" to $149 in 2017.To put that figure in better perspective, that means many seniors will pay 42% more in Part B premiums in 2017 than they paid in 2015.
The potential Part B premium increase is further amplified by a planned 4.4% increase in Part D premiums next year.
What to watch
Social Security bases its cost of living increase on the Bureau of Labor Statistics'Consumer Price Indexfor Urban Wage Earners and Clerical Workers, or CPI-W. The Social Security Administration averages third quarter CPI-W and then compares that average against the average third quarter CPI-W from the prior year. If CPI-W is higher in the current year, then Social Security income increases in the following year.
Since the amount of Part B premiums you pay next year could depend a lot on CPI-W for August and September and that data has yet to be released, Medicare enrollees may want to keep a close eye on the calendar this fall. The BLS is scheduled to release theAugust and September CPI-W on Sept. 16 and Oct. 18, respectively, giving additional insight into what the actual Medicare Part B premium increase may be next year.
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