Medicare Premiums Budget Fix

Submitted by Kaizen Financial Advisors, LLC on November 13th, 2015

You may recall the previous post discussing the Medicare Part B premium increases. Well, recently Congressional leaders and the Obama Administration fixed that potentially alarming premium increase under the recently-passed government budget deal.

Medicare Part B covers most health care services outside of hospitals, and thus represents one of the biggest expense items in the government-run health system. The program is voluntary, but 91% of all Medicare beneficiaries are enrolled in Part B.

The problem arose because, under Social Security and Medicare rules, the government is required to collect 25% of all expected Part B costs from recipients each year in the form of premiums. The total Part B cost was anticipated to reach $171.2 billion 2016, of which 25% is approximately $42.8 billion.

However, another provision says that in years where there is no increase in Social Security benefits—such as next year—Medicare premiums must be held steady for current Social Security recipients. As a result, the entire increase would have had to be borne by enrollees who either don’t yet collect Social Security checks; enrollees with incomes above $85,000 (single) or $170,000 (married); or enrollees who are dual Medicare-Medicaid beneficiaries. In all, these three categories represent 30% of 2016 Medicare beneficiaries, roughly 7 million Americans.

The new budget deal creates a $12 billion loan from the U.S. Treasury to the Medicare trust fund to reduce the impact on those Medicare participants. Instead of seeing their monthly premiums go up from $104.90 to $159.30, premiums increase a more modest 14%, to $120 a month next year, plus a monthly surcharge of $3. This will allow premiums to rise more gradually, and spread the cost over a longer period of time.

Sources

Bob Veres, “CA – 2015-11-2 – Medicare Budget Fix-It”

http://finance.yahoo.com/news/medicare-premium-increases-not-bad-0625322...

http://www.aarp.org/health/medicare-insurance/info-2015/medicare-part-b-...

https://www.medicare.gov/your-medicare-costs/part-b-costs/part-b-costs.html

http://www.hhs.gov/about/budget/budget-in-brief/cms/medicare/index.html