Congress and the White House have taken steps to decrease an unforeseen hike in standard Medicare Part B next year. 1 in 7 beneficiaries are facing a 52% increase in premiums, to $159.30 in 2016. This will mark the largest rates jump in Medicare history.
However, a bipartisan contract on the federal budget, signed by President Obama on Nov. 2, has temporarily set theÂ current premiums for most beneficiaries at $121.80 a month.
While most of the beneficiaries will pay the same Part B premium in 2016 like this year â€” $104.90 a month â€” specific groups of people will pay more, due to a vague part of the Medicare law which ties theÂ cost of living allowance (COLA)Â in Social Security benefits to Part B premiums.
The government announced on Oct. 15 that there will not be a Social Security increase next year. So most people who receive both Medicare and Social Security will also not find an increase in their Medicare Part B premiums. But, that will transfer the burden of paying for increased costs to those Medicare beneficiaries who do not collect a Social Security check, higher-income recipients and those new to the program.
About 7 in 10 recipients have their premiums automatically subtracted from their Social Security checks. And under a “hold-harmless” stipulation of the law, a zero Social Security COLA in any year implies that those people cannot pay more in standard Part B premiums than in the previous year â€” an incident that has happened only twice in the last 40 years.
Tricia Neuman, director of Medicare policy at the Kaiser Family Foundation, a health research group, says that the aim is to provide some protection to make sure that their checks won’t go down when Part B premiums rise.
The hold-harmless policy affects several groups, comprising of about 30% of Medicare enrollees. Around 16% of people with low incomes, whose premiums are paid by their states, will also not be affected personally. The remaining 14% (or around 1 in 7) will face the full blow of higher premiums out of their own earnings.
The Medicare law states that standard premiums have to be set to cover 25% of the expected Part B costs for the next year, with the federal government paying the rest.
In normal years, those costs are distributed through the Medicare population with one premium for most enrollees, apart from the very rich, who pay more. However in zero-COLA years, the whole burden usually falls on a relatively few peopleâ€” that is what happened in 2010 and 2011, when Congress was unable to soften the blow.
This year AARP and around 70 other organizations asked lawmakers to get involved, and they successfully decreased the size of the expected premium to $118.80Â a month, with an extra monthly surcharge of $3 to tackle the financial shortfall. The surcharges will be used to pay for a $7.5 billion loan that finances the premium reduction, with the hope that it will be paid off in five years.
The monthly surcharge of $3 will be paid by most beneficiaries not held harmless in 2016, on top of their new monthly premium. However those who pay higher income-related Part B premiums â€” which is set to range from $170.50 to $389.80 next year â€” will need to pay surcharges of between $4.20 and $9.60Â a month, according to their income.
In case there is a Social Security COLA in 2017 or 2018, and the standard premium returns to a single amount, the surcharges will be applicable to all Medicare beneficiaries till the loan is paid off.
Also the budget agreement reduces the projected annual Part B deductible. It had been expected to rise from $147 this year to $223 in 2016, but now setting it at only $166 next year.