Nearly a third of the roughly 50 million elderly Americans who depend on Medicare for their physician care and other health services could see their premiums jump by 52 percent or more next year. That’s because of a quirk in the law that punishes wealthier beneficiaries and others any time the Social Security Administration fails to boost the annual cost of living adjustment.
While Congress is largely focused on addressing looming shortfalls in the Social Security Disability Insurance program, a financial time-bomb of sorts may go off in 2016 because of the festering premium problem in Medicare Part B – the premium-based government health insurance program that covers seniors’ visits to doctors and other health care providers, out-patient care and durable medical equipment.
Unless Congress or Health and Human Services Secretary Sylvia Mathews Burwell intervenes, an estimated 15 million seniors, first-time beneficiaries or those currently claiming dual Medicare and Medicaid coverage will see their premiums jump from $104.90 per month to $159.30 for individuals, according to an analysis by the Center for Retirement Research at Boston College. Higher-income couples would pay multiples of that increase.
A spokesperson for the Centers on Medicare and Medicaid Services on Friday confirmed that the premium hike is in the works, although a final decision won’t be made until later this year. While approximately 70 percent of Medicare beneficiaries “are expected not to see a premium increase in 2016,” he stressed, “the remaining 30 percent of beneficiaries would pay a higher premium based on this projection.”
CMS is exploring its options for finding a way to blunt the effect of the major premium increase next year, although officials say the federal agency does not have authority to extend beyond what the law calls for.
The likely rate hike has received relatively little public attention until now. According to the Center for Retirement Research study, it illustrates the broader “complicated interaction” between Medicare premiums, which are typically automatically deducted from Social Security benefits, and the rest of Social Security funds that are used for retirement and other non-health care related expenditures.
For just the third time since automatic cost of living adjustments started in 1975, Social Security will not increase the cost of living benefit next year, simply because the Consumer Price Index used by the government has remained relatively flat.
Since Social Security COLAs do not “fully reflect the increase in health care costs faced by the elderly,” the study notes, any missed annual cost of living adjustment can trigger a crisis in the Medicare Part B program.
Because the law for various reasons “holds harmless” about 70 percent of Medicare beneficiaries from premium hikes to compensate for diminished resources caused by a missed cost of living adjustment, the remaining 30 percent of Medicare Part B beneficiaries get clobbered by premium increases.
“Because the COLA for Social Security benefits is expected to be zero for 2016, premiums would not increase for the 70 percent protected by the hold harmless provision,” according to the study. “Under current law, Part B premiums for other beneficiaries must be raised enough to offset premiums foregone due to the hold-harmless provision.”
Unless the administration figures out some “work-around,” the study states, the base Part B premium would rise from $104.90 to $159.30 – a 52 percent increase.
The study goes on to say that participants with higher incomes would then have to “pay multiples” of $159.30 depending on their income levels. As an example, each member of a married couple with household income ranging from $170,000 to $214,000 a year would pay a Part B premium in 2016 of $223.00. “Premiums would top out at $509.80 per person for couples with income of more than $428,000,” the study states.
Juliette Cubanski, a Medicare expert with the Kaiser Family Foundation, said on Friday that the premium increases “could sting” millions of older Americans, but cautioned that the projected 52 percent average increase in premiums is based on 2015 Medicare Trustees’ projections that may be altered before the new rates take effect.
“The Secretary of HHS has some authority and discretion about what level the Part B premium will be set at,” she said. “So we may not see as steep an increase as the trustees are projecting.”
But seniors would be wise to brace for a hefty increase in any case.