By Judith
Graham October 5, 2017
Millions of seniors will soon be notified that
Medicare premiums for physicians’ services are rising and likely to consume
most of the cost-of-living adjustment they’ll receive next year from Social
Security.
Higher 2018 premiums for Medicare Part B will
hit older adults who’ve been shielded from significant cost increases for
several years, including large numbers of low-income individuals who struggle
to make ends meet.
“In effect, this means that increases in
Social Security benefits will be minimal, for a third year, for many people,
putting them in a bind,” said Mary Johnson, Social Security and Medicare policy
consultant at the Senior Citizens League. In a new study, her organization
estimates that seniors have lost one-third of their buying power since 2000 as
Social Security cost-of-living adjustments have flattened and health care and
housing costs have soared.
Another, much smaller group of high-income
older adults will also face higher Medicare Part B premiums next year because
of changes enacted in 2015 federal legislation.
Here’s a look at what’s going on and who’s
affected:
The Basics
Medicare Part B is insurance that covers
physicians’ services, outpatient care in hospitals and other settings, durable
medical equipment such as wheelchairs or oxygen machines, laboratory tests, and
some home health care services, among other items. Coverage is optional,
but 91 percent of Medicare enrollees —
including millions of people with serious disabilities — sign up for the
program. (Those who don’t sign up are responsible for charges for these services
on their own.)
Premiums, which change annually, represent
about 25 percent of Medicare Part B’s expected per-beneficiary program
spending. The government pays the remainder.
In fiscal 2017, federal spending for Medicare
Part B came to $193 billion. From 2017 to 2024, Part B premiums are projected to
rise an average 5.4 percent each year, faster than other parts
of Medicare.
‘Hold Harmless’ Provisions
To protect seniors living on fixed incomes,
a “hold harmless” provision in
federal law prohibits Medicare from raising Part B premiums if doing so would
end up reducing an individual’s Social Security benefits.
This provision applies to about 70 percent of
people enrolled in Part B. Included are seniors who’ve been enrolled in
Medicare for most of the past year and whose Part B premiums are automatically
deducted from their Social Security checks.
Excluded are seniors who are newly enrolled in
Medicare or those dually enrolled in Medicaid or enrolled in Medicare Savings
Programs. (Under this circumstance, Medicaid, a joint federal-state program,
pays Part B premiums.) Also excluded are older adults with high incomes who pay
more for Part B because of Income-Related Monthly Adjustments (see more on this
below).
Recent Experience
Since there was no cost-of-living adjustment
for Social Security in 2016, Part B monthly premiums didn’t go up that year for
seniors covered by hold harmless provisions. Instead, premiums for this
group remained flat at $104.90 —
where they’ve been for the previous three years.
Last year, Social Security gave recipients a
tiny 0.3 percent cost-of-living increase. As a result, average 2017 Part B
month premiums rose slightly, to $109, for seniors in the hold harmless group.
The 2017 monthly premium average, paid by those who weren’t in this group and
who therefore pay full freight, was $134.
Current Situation
Social Security is due to announce
cost-of-living adjustments for 2018 in mid-October. Based on the best
information available, it appears to be considering an adjustment of about 2.2
percent, according to Juliette Cubanski, associate director of the program on
Medicare policy at the Kaiser Family Foundation. (Kaiser Health News is
another, independent program of the Kaiser Family Foundation.)
Apply a 2.2 percent adjustment to the average
$1,360 monthly check received by Social Security recipients and they’d get an
extra $29.92 in monthly payments.
For their part, the board of trustees of
Medicare have indicated that Part B monthly premiums are likely to remain
stable at about $134 a month next year. (Actual premium amounts should be
disclosed by the Centers for Medicare & Medicaid Services within the next
four to six weeks.)
Medicare has the right to impose that charge,
so long as the amount that seniors receive from Social Security isn’t reduced
in the process. So, the program is expected to ask older adults who paid $109
this year to pay $134 for Part B coverage next year — an increase of $25 a
month.
Subtract that extra $25 charge for Part B
premiums from seniors’ average $29.92 monthly Social Security increase and all
that be left would be an extra $4.92 each month for expenses such as food,
housing, medication and transportation.
“Many seniors are going to be disappointed,”
said Lisa Swirsky, a policy adviser at the National Committee to Preserve
Social Security and Medicare.
Higher Income Brackets
Under the principle that those who have more
can afford to pay more, Part B premium surcharges for higher-income Medicare
beneficiaries have been in place since 2007. These Income-Related Monthly
Adjustment Amounts (IMRAA) surcharges vary, depending on the income bracket that
individuals and married couples are in. Nearly 3 million Medicare members paid
the surcharges in 2015.
For the past decade this is how surcharges
have worked:
Bracket One: Individuals
with incomes of $85,001 to $107,000 were charged 35 percent of Part B
per-beneficiary costs, resulting in 2017 premiums of $187.50.
Bracket Two: Incomes
of $107,001 to $160,000 were charged 50 percent, resulting in 2017 premiums of
$267.90.
Bracket Three: Incomes of $160,001 to $214,000 were charged 65 percent,
resulting in 2017 premiums of $348.30
Bracket Four: Incomes of more than $214,000 were charged 80 percent,
resulting in 2017 premiums of $428.60.
(Information for married couples who file
jointly can be found here.)
Now, under legislation passed in 2015,
brackets two, three and four are adopting lower income thresholds, a move that
could raise premiums for hundreds of thousands of seniors. Bracket two will now
consist of individuals with incomes of $107,001 to $133,500; bracket three will
consist of individuals making $133,501 to 160,000; and bracket four will
include individuals making more than $160,000. (Thresholds for couples have
been altered as well.)
As John Grobe, president of Federal Career
Experts, a consulting firm, noted in a blog post, this change
“will add another layer of complexity” to higher-income individuals’ decisions
regarding “electing Part B.”
If you’ve retired recently, moved to part-time
status, divorced or otherwise undergone life changes that affect your income,
you can ask Social Security for a new IRMAA determination, said Casey Schwarz,
senior counsel at the Medicare Rights Center. Tips on what to do can
be found at that organization’s site for consumers, Medicare Interactive.
We’re eager to hear from readers about
questions you’d like answered, problems you’ve been having with your care and
advice you need in dealing with the health care system. Visit khn.org/columnists to
submit your requests or tips.
KHN’s coverage related to aging &
improving care of older adults is supported by The
John A. Hartford Foundation.
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