Retiring soon? Think Again: MEDICARE PART B PREMIUMS TO RISE 52%

MEDICARE PART B PREMIUMS TO RISE 52% 

7 MILLION ENROLLEES MUST PICK UP THE TAB

2016 might not be anything like 2015 for about 30% of Medicare beneficiaries — roughly 7 million Americans. That’s because premiums for individuals could increase a jaw-dropping 52% to $159.30 per month. And for individuals whose incomes exceed $85,000, premiums could end up ranging from $223.00 to $509.80 per month.

Do the math; the average Social Security benefit was $1,180.80 per month. That would make the $159.30  a whopping %13.5 of the SSI! 

What gives? Blame the “hold harmless” provision in the law that addresses cost-of-living adjustments (COLA) for Social Security benefits. That law limits the dollar increase in the premium to the dollar increase in an individual’s Social Security benefit, according to a report by Alicia Munnell of the Center for Retirement Research at Boston College.

The consumer price index (CPI) is not likely to increase in the period used to determine the COLA for 2016. That means it’s very likely that Social Security recipients — for just the third time since automatic adjustments started in 1975 — will not see an increase in their benefit, according to Munnell’s report.

WHO MUST PAY THE HIGHER MEDICARE PART B PREMIUM? 

This group includes individuals who enroll in Part B for the first time in 2016; enrollees who do not receive a Social Security benefit; beneficiaries who are directly billed for their Part B premium; current enrollees who pay an income-related higher premium; and dual Medicare-Medicaid beneficiaries, whose premiums are paid by state Medicaid programs.

What might you do or consider if you’re among those who have to pay the higher premium? 

Individuals who enroll in Part B for the first time in 2016. 

“Enroll earlier if you’re already 65 and otherwise eligible,” says Michael Kitces, publisher and author of the Nerd’s Eye View blog. “If you’re not eligible now, I’m afraid you’re stuck.” 

Enrollees who do not receive a Social Security benefit. 

Those who are already on Medicare or could apply immediately and who were going to start Social Security benefits in the next year or so might consider applying right now instead, Kitces says. “Those who file in the coming weeks should be able to get both Social Security benefits and Medicare in November and December, which are the two months used for measuring, and therefore make themselves eligible,” he says. If you are among those considering different Social Security claiming strategies — such as file-and-suspend, restricted application and delay to age 70 — there’s no getting around it. You’ll have to do cost-benefit analysis to see if the benefit of the strategy is greater than the cost of the increased Medicare Part B premium.

In the long run, Kitces says, those who anticipate living a long time and who will benefit from delaying Social Security by several years should still delay. “The value of delaying Social Security is far more beneficial than the squeeze from hold harmless,” he says. 

Beneficiaries who are directly billed for their Part B premium. 

If you’re already getting Social Security benefits, request to have your Part B premium deducted from your Social Security check ASAP; you should still have time to be eligible for hold harmless, Kitces says. 

Enrollees who pay an income- related higher premium. 

“It is critically important for folks to review the Social Security notice of 2016 Medicare B premiums that will be in mailboxes later this fall,” says Katy Votava, president of Goodcare.com in Rochester, N.Y. “It’s not uncommon for people to qualify for a decrease because their income drops to a lower bracket as a result of specific lifechanging events.” The problem, Votava says, is that Social Security doesn’t know about those events unless the person notifies the agency.

For those whose incomes are still above the thresholds: “Unfortunately, you’re stuck here,” Kitces says. “If possible, get your 2015 income below the line, so that at least if hold harmless kicks in again ... you can benefit slightly from the second time it flows through.” 

Dual Medicare-Medicaid beneficiaries, whose full premiums are paid by state Medicaid programs. 
“Since your Medicare premiums are being paid by the state at this point, it doesn’t effectively matter whether hold harmless applies for you or not, as to the extent higher premiums occur, they will be paid by the state anyway,” Kitces says. “Not surprisingly, I believe there are some states who are not so happy about this.”