The Huge Medicare Hike That Was Scaring Seniors Will Be Cut in Half
Policy + Politics

The Huge Medicare Hike That Was Scaring Seniors Will Be Cut in Half


About a third of Medicare’s 56 million beneficiaries who were staring down the barrel of a sharp increase in their premiums next year just got a reprieve from federal officials.

Those beneficiaries, mostly higher-income earners or people new to the system, were informed last month that their health care premiums would rise by as much as 22 percent next year – elevating the cost to an estimated $149 per month. Now it appears they will have to pay less than half that increase.

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The jarring premium hike was largely due to a quirk in the law that generally penalizes wealthier Americans and others receiving Medicare any time the Social Security Administration fails to approve a substantial cost of living-adjustment.

The logic here is that unexpected government health care costs can crop up in the coming year, and if Social Security beneficiaries are denied a substantial cost of living adjustment, then the wealthiest third of them must pay more into the system as a safeguard. The remaining 70 percent would be “held harmless.”

Last month, the government announced that the Social Security COLA for the coming year would be a near negligible 0.3 percent. That marked the third consecutive year in which the nation’s 65 million seniors saw virtually no increase in their Social Security benefits, despite rising health care premiums and drug costs.

But the Centers for Medicare and Medicaid Services, an agency of the Department of Health and Human Services, stepped in on Thursday and announced that the feared 22-percent premium hike had been cut by more than half.

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Premiums for that targeted group – most of whom are on fixed incomes-- will rise by 10 percent to $134 a month in 2017, up from $121.80 this year. The Medicare Part B premiums cover doctor visits and other out-patient procedures. The remaining 70 percent of Medicare beneficiaries will pay just $109 a month next year, up by about four percent from $104.90 this year.

Besides the basic monthly premium, individual retirees making more than $85,000 a year and married couples with incomes above $170,000 will pay an extra surcharge that ranges to nearly $300 at the highest income levels. CMS also announced that the annual deductible for all Medicare Part B beneficiaries will be $183 in 2017, in contrast to $166 in 2016.

CMS officials said the steep Part B premium hike was averted after HHS Secretary Sylvia Mathews Burwell dipped into some of the Medicare Part B program’s reserves to “mitigate” the increase, as the Wall Street Journal reported yesterday. The program’s reserve ratio, now 13 percent, is just below the 14 percent target recommended by the program’s actuaries, according to CMS.

“Medicare’s top priority is to ensure that beneficiaries have affordable access to the care they need,” said CMS Acting Administrator Andy Slavitt in a statement. “We will continue our efforts to improve affordability, access, and quality in Medicare.”