Why Your Part B Medicare Premiums Are Likely to Increase

Filbrandt & Company
Oct 03, 2016

Part B Medicare Premiums

Premiums for Part B Medicare coverage are likely to increase significantly in 2017, and wealthier Americans will see a substantially greater increase than the majority of beneficiaries.

Individuals earning between $85,001 and $170,000 may see their premiums increase to around $204.40, or around 20 percent. Couples earning between $170,001 and $214,000 could see a similar increase.

The increase for couples earning between $214,001 and $428,000 will be even steeper, to $467.20 per month, also a 20 percent hike.

It’s important to note that these Medicare surcharges have a unique structure. An extra dollar of income can incur a substantially higher surcharge. For example: a single person with $107,000 of income this year owes a $584 surcharge for Part B. This compares to someone earning $107,001, who will owe $1,462.

Rates are increasing for a couple of reasons:

  1. The anticipated 0.2 percent Cost of Living Increase in Social Security benefits will not be enough to allow for full payment of the 2017 Medicare Part B premium by Part B enrollees who are subject to the “Hold Harmless” provision of Social Security. It ensures that Social Security payments will not decline from one year to the next due to increases in Medicare Part B premiums. This applies to people who have their Medicare Part B premiums deducted from Social Security, or about 70 percent of Medicare recipients. This means the remaining 30 percent bear responsibility for health care fees which are rising much higher than 0.2 percent.
  2. The number of individuals enrolling for coverage continues to grow as the Baby Boomer population ages. More services are needed, and concurrently, a way to pay for those additional services is needed.

The official percentage of the COLA increase will be released in October. When the numbers were released in October of 2015, they called for an increase in Medicare Part B premiums for some people of up to 50 percent. But Congress intervened, and as part of the Bipartisan Budget Act of 2015 reduced the percentage increase from 50 percent to 15 percent.

The cost of limiting the increases in 2016 was paid for by a loan of general revenue from the Federal Treasury to the Part B Trust Fund. Medicare beneficiaries will pay back the loan over time from set increases to future premiums. If Congress acts again this year to limit the increase, it means that last year’s loan, with perhaps an additional amount added, will still be payable at some point in the future.

There will likely be pressure on Congress to act similarly this year. One difference: With it being an election year, members of Congress will be in their home districts campaigning in October instead of meeting in Washington. Therefore, any Congressional action on the Medicare premium increase for 2016 is likely to occur much later in the year.

We can’t say for sure if Congress will intervene as it did last year, particularly since action is not likely until after the election.

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