50% Rise in Part B Premium for some?

[mickeyd]

May affect those couples who are near the $170K line.

Nearly one-third of Medicare beneficiaries could see a 50-percent rise in Medicare Part B premiums next year. The legal provision in place to protect beneficiaries from premium increases higher than cost-of-living adjustments (COLA), inadvertently excludes this group.

How this works:

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which is used to calculate the COLA for Social Security, veteran and survivor benefits, and military and federal retiree pay, currently remains at minus 0.2 percent for the first three quarters of the fiscal year.

The average CPI-W for the current quarter (July through September) will determine whether there will be a 2016 COLA increase.
If there isn't a COLA increase, the “hold harmless” provision takes effect. This provision prohibits premium increases higher than COLA.
According to the Centers for Medicare and Medicaid Services, “approximately 70 percent of beneficiaries are expected not to see a premium increase in 2016.”

However, because of a glitch in the law, 30 percent of beneficiaries are not protected by the hold harmless provision and would see a steep Part B premium increase. This group includes those who enter the Medicare system next year; those who pay their Medicare premiums directly instead of having them deducted through Social Security; or those who are making at least $85,000 for an individual and $170,000 for a married couple

Legal Glitch Could Affect Your Medicare Premiums : MOAA

 

[Lakewood90712]

The article doesn't mention the dollars and cents increase in cost (I will not be on medicare for years).

I don't think it is a "glitch" Medicare is not in good financial shape, any way to increase revenue will be implemented where possible , IMO

 

[RE2Boys]

Only "glitch" I see is the one for new sign-ups......they may have a case as to it being unfair unless they fall into the other two categories. The one's paying the premiums directly are deemed not to have a need SS as they are 65 and not collecting (though I think the law should use your FRA). Those making over certain limits have had to pay extra for Medicare for many years in the past.

 

[Telly]

I first read about it here, has more detail:
3 ways to dodge big Medicare premium hikes next year

Under Medicare rules, the program is required to charge Part B premiums that bring in enough revenue to cover 25% of its Part B expenses. So when health care costs increase, as they have lately, so too do premiums. Typically all Medicare beneficiaries share those costs in the form of higher premiums—but next year, only some will pay the price.

Why the big discrepancy in premium costs? It’s because most Part B premiums are paid out of people’s monthly checks from Social Security, which has what’s called a “hold harmless” provision. According to this rule, Medicare beneficiaries who pay the lowest Part B premium can’t be required to pay more for coverage if they don’t receive an annual cost-of-living adjustment (COLA) in their Social Security benefit.

Well, if you haven’t already noticed, there’s been little inflation this past year, and odds are, there won’t be a Social Security COLA in 2016. That would mean roughly 70% of Medicare beneficiaries will be held harmless, and they will continue to pay $104.90 a month for Part B in 2016.

• New Medicare beneficiaries with taxable incomes below $85,000 ($170,000 if filing jointly) will pay from from $104.90 to $159.30.
• For taxable incomes between $85,000 and $107,000 ($170,000 to $214,000 if filing jointly) – from $146.90 a month this year to $223.00.

And this snip I have a question on:

Avoiding a big Part B premium hike next year would pay off because these unusually high premiums will recede in future years, once Social Security starts paying COLAs again. There were no COLAs in 2010 and 2011, either, and the hold harmless provision raised the lowest Part B premium from $96.40 a month in 2009 to $110.50 in 2010 and $115.40 in 2011. But the return of a COLA in 2012 allowed Medicare to once again spread the financial pain to everyone, and the premium dropped to $99.90 a month.

Does this mean that someone who needs to start Medicare in 2016, and gets hit with the $159/mo. rather than the $104/mo., that his/her rate will later drop to a lower rate shared by all, if there is a COLA for 2017?

 

[MBSC]

And this snip I have a question on:

Avoiding a big Part B premium hike next year would pay off because these unusually high premiums will recede in future years, once Social Security starts paying COLAs again. There were no COLAs in 2010 and 2011, either, and the hold harmless provision raised the lowest Part B premium from $96.40 a month in 2009 to $110.50 in 2010 and $115.40 in 2011. But the return of a COLA in 2012 allowed Medicare to once again spread the financial pain to everyone, and the premium dropped to $99.90 a month.

Does this mean that someone who needs to start Medicare in 2016, and gets hit with the $159/mo. rather than the $104/mo., that his/her rate will later drop to a lower rate shared by all, if there is a COLA for 2017?

Assuming the standard rate for a person not subject to the "hold harmless provision" is $159 in 2016, and the person starts taking SS payments in 2016 to become eligible for the hold harmless provision, and there is a COLA for 2017, then yes the premium will drop to what those grandfathered in will pay in 2017. This also assumes additional income does not push you into the higher Part B premium brackets.

This is how it worked from 2010-2012:

In 2010 and 2011, with no Social Security COLA, the hold‐harmless provision prevented the majority of Medicare beneficiaries from paying any increase in Part B premiums. Thus, in both 2010 and 2011, the majority of Medicare beneficiaries paid monthly premiums of $96.40, which was the standard Part B premium amount in 2009.

Roughly one‐quarter of all Part B enrollees were not held harmless in 2010 and 2011, including new Medicare enrollees (3 percent); higher‐income beneficiaries (5 percent); and Medicare beneficiaries who do not have their Part B premium deducted from their Social Security benefit payment (19 percent) – this group consists mainly of beneficiaries dually eligible for Medicare and Medicaid, for whom Medicaid pays the monthly Part B premium (17 percent). These beneficiaries were subject to a higher Part B premium than those who were protected by the hold‐harmless provision to ensure that Part B enrollee premium contributions continued to cover 25 percent of program costs. The standard monthly premium for these beneficiaries was $110.50 in 2010 and $115.40 in 2011.

With an increase in the Social Security COLA scheduled for 2012, fewer beneficiaries will be affected by the hold-harmless provision, and the beneficiary portion of annual Part B expenditures will be spread across a greater share of Part B enrollees than in 2010 and 2011. This results in a monthly Part B premium of $99.90 in 2012 – an increase for the majority of beneficiaries who have been protected by the hold‐harmless provision in 2010 and 2011 who were paying $96.40, and a decrease for all others who were paying the standard amount in both years.

The monthly Medicare Part B premium for those who have been paying the 2011 standard Part B premium (i.e., not protected by the hold‐harmless provision this year) will decrease by $15.50 per month, from $115.40 to $99.90 (a 13.4 percent decrease). For those who have been paying the 2010 standard Part B premium (e.g., beneficiaries who enrolled in Medicare in 2010), the monthly Part B premium will decrease by $10.60 per month, from $110.50 to $99.90 (a 9.6 percent decrease).

Source: https://kaiserfamilyfoundation.file...ups-and-downs-of-medicare-part-b-premiums.pdf

 

[ivinsfan]

Has anybody here gone from paying the Medicare part B out of pocket to claiming SS and have it taken from the check. How soon does the payments switch over, immediately?

My DH was FRA in Jan and I will be able to claim spousal in October, we were thinking of claiming his benefit and my spousal in Jan of 2016. It sounds as if it might be prudent to just file sooner to avoid a raise in Part B payments.

 

[W2R]

Has anybody here gone from paying the Medicare part B out of pocket to claiming SS and have it taken from the check. How soon does the payments switch over, immediately?

My DH was FRA in Jan and I will be able to claim spousal in October, we were thinking of claiming his benefit and my spousal in Jan of 2016. It sounds as if it might be prudent to just file sooner to avoid a raise in Part B payments.

The switch was pretty fast. Prior to claiming SS, I had Medicare automatically deducted from my checking account. They didn't stop it in time so I paid twice for the transition month, and then they refunded the overpayment.

I started SS as of my 66th birthday on June 8th (2014). I got my first SS check on July 11th, with Medicare deducted from it. The refund hit my bank on September 11th.

 

[Walt34]

The switch was pretty fast. Prior to claiming SS, I had Medicare automatically deducted from my checking account. They didn't stop it in time so I paid twice for the transition month, and then they refunded the overpayment.

This is good to know because I'll be in that position next year. Now I'm paying Medicare premiums OOP and I'll start SS at FRA (66 for me) next spring.

 

[marko]

So does this send the 11,214 "Should I take SS early?" discussion threads back to re-calc, review and rehash mode?

 

[marko]

But seriously, "50% Increase" sounds scary.
Going from $104 to $159 doesn't sound as bad considering that without Medicare you'd be paying something like $700 a month.

 

[Telly]

.........
This is how it worked from 2010-2012:
Source: https://kaiserfamilyfoundation.file...ups-and-downs-of-medicare-part-b-premiums.pdf

Thanks!
Everything I had read before just did not seem definitive enough as to whether the poor soul who had to pay more as a newby, paid more forever, or was later reduced to match the crowd when COLA's were restarted. This answers it. A limited window, with limited effect.

 

[ZMAN]

I have a related question if anyone knows. I was thinking of starting a thread but the question is really related to the issued in this thread.

Does the Medicare means test currently includes RMD's and SS income as part of the test, or are they somehow excluded?

The way I figure it since DW and I have a decent stash of qualified funds and both of us have independent earnings records and are waiting to 70 to claim under our own records, we are going to have a fairly high MAGI after age 70, putting us at least into what would now be $208 per month each for Part B.

Thanks always.

Zman

 

[marko]

I have a related question if anyone knows. I was thinking of starting a thread but the question is really related to the issued in this thread.

Does the Medicare means test currently includes RMD's and SS income as part of the test, or are they somehow excluded?

The way I figure it since DW and I have a decent stash of qualified funds and both of us have independent earnings records and are waiting to 70 to claim under our own records, we are going to have a fairly high MAGI after age 70, putting us at least into what would now be $208 per month each for Part B.

Thanks always.

Zman

From Jesterfinancial on Medicare expenses: February 2018: A possible wake-up call for financial planning. | Jester Financial Technologies

"...Some examples of what Medicare will deem income: Any wages, Social Security benefits, rental property income, pensions, most capital gains, all dividends (taxable and tax-free), most annuities, traditional IRA’s, and most retirement plans. The income from these sources will be counted against you..."

Also the note:
"...In 2014, the average Medicare income amount is $85,000 for an individual and $170,000 for a couple, but, unfortunately, these income amounts are expected to change by 2016.

According to President Obama’s 2014 Budget proposal as well as a proposal put forth by the Bi-Partisan Policy Center the income amounts are expected to drop to $60,000 for an individual and $90,000 for a couple...."

 

[ZMAN]

Thanks Marko! Oh well. That answers that. At the end of the day I think between Part B, Part F (Plan F) and Part D, our health insurance will not be that much cheaper than what we pay to our private carrier. At least we will not have a deductible as we do now and will have a nationwide network.

Let me ask the bonus and still related question.

I know medicare premiums are deductible against self employment income just like premiums paid to corporate health insurance carriers and I am still a self employed semi-retired lawyer.

But on full retirement, assuming our AGI consists only of ordinary dividends, social security income and required minimum distributions, can medicare premiums still be deducted?

Or are they deductible only against self-employment income?

Looking at the 1040 form it looks like all of those income sources are above the line for medical premiums paid, but I know there might be another form or calculation that would some negate the ability to take the deduction.

Thanks always (This wonderful forum has answered every question I have ever posted.)

 

[REWahoo]

From Jesterfinancial on Medicare expenses: February 2018: A possible wake-up call for financial planning. | Jester Financial Technologies

According to President Obama’s 2014 Budget proposal as well as a proposal put forth by the Bi-Partisan Policy Center the income amounts are expected to drop to $60,000 for an individual and $90,000 for a couple...."

Note the bold above. Hundreds (thousands?) of trial balloons are floated every year and never get beyond that point. Don't count your buzzards until they find a carcass.

 

[marko]

Note the bold above. Hundreds (thousands?) of trial balloons are floated every year and never get beyond that point. Don't count your buzzards until they find a carcass.

Good point!

 

[ZMAN]

So as the law is currently configured do SS and RMD's count towards MAGI for the Medicare means test?

 

[MichaelB]

So as the law is currently configured do SS and RMD's count towards MAGI for the Medicare means test?

Yes. It also includes tax exempt interest income from munis.

 

[timo2]

So does this send the 11,214 "Should I take SS early?" discussion threads back to re-calc, review and rehash mode?

It could. It has me wondering. But I have not seen any calculators to assist in factoring this, because it has not really been a factor before. Here is an interesting link

https://www.kitces.com/blog/underst...provisions-for-social-security-beneficiaries/

from the link: "Except in the coming 2016 year, when the Social Security COLA is projected to be 0.0%, the combination of these two rules means that none of the coming year’s Medicare Part B premium increase can be applied to the 70%+ of Medicare enrollees eligible for the Hold Harmless provision… which means all of the increase must instead be borne by the roughly 25% of Medicare enrollees not subject to the “Hold Harmless” provision. As a result, unless the Secretary of Health and Human Services Department intervenes by October, based on current projections the Hold Harmless provision may result in a spike in Medicare Part B premiums by as much as 52% (or over $600 per person) for those not protected by the rule!"

 

[Animorph]

It's a short term hit, unless the SS COLA continues at 0% indefinitely. The Part B premiums will be set system wide to get the needed dollars, but will be the same for everyone (with steps for income levels). It's just that some people won't pay increases in 0% COLA years. When enough SS COLA finally hits, everyone will be paying the same amounts once again. It's not a case where the unfortunate 25%-30% see a 50% bump and then see future increases based on a percentage of that bumped amount. It's a spike, not a step.

 

[timo2]

It's a short term hit, unless the SS COLA continues at 0% indefinitely. The Part B premiums will be set system wide to get the needed dollars, but will be the same for everyone (with steps for income levels). It's just that some people won't pay increases in 0% COLA years. When enough SS COLA finally hits, everyone will be paying the same amounts once again. It's not a case where the unfortunate 25%-30% see a 50% bump and then see future increases based on a percentage of that bumped amount. It's a spike, not a step.

Thanks for the clarification. That makes sense.

I did find the Kitces site interesting. Here is another link on the subject ,adding in social security, from that same site "And for those who still plan to delay Social Security benefits for many years to come, the reality is that delaying Social Security benefits is still so valuable, that even the projected Medicare Part B premium spike is still not nearly enough to deter the long-term value of generating Social Security’s Delayed Retirement Credits for those who anticipate living well past the breakeven period." https://www.kitces.com/blog/social-...premium-spike-due-to-hold-harmless/#more-8566

 

[MBSC]

Another article on this topic:
Surprise! Your Medicare Part B premiums may increase by 50 percent in 2016

Once COLAs resume — and they surely will — Part B premiums will “normalize” over time. People held harmless next year would pay more. And people not held harmless in 2016 would see their premiums decrease. After at most a few years, everyone without an income-based premium surcharge once again would pay the same Part B premium.

Lastly, there could also be some more financial heartburn from the Part B situation for other Medicare beneficiaries. The trustees’ report projected that the annual deductible for Part B Medicare expenses would also increase by 52 percent in 2016, from $147 to $223. People on Original Medicare would be hit by this, except for those with plan C and F Medigap policies, which pay that deductible.

 

[Senator]

Although it is a 50% bump, if I read the article correctly, it is only $54.30 a month for someone making over $85K a year.

I really do not see the issue. It is a small pittance for someone making $85K a year. Medicare is still a terrific subsidy to retirees.

Of course, I would rather they increase the payroll tax on the workers after 2016...

 

[Rosie]

Although it is a 50% bump, if I read the article correctly, it is only $54.30 a month for someone making over $85K a year.

Which is precisely why articles lead with that scary 50% Increase!! line. Nothing works better than fear to get people to respond to clickbait. Except perhaps outrage.

I really do not see the issue. It is a small pittance for someone making $85K a year. Medicare is still a terrific subsidy to retirees.

ITA

 

[Chuckanut]

If you enjoy a larger than average retirement income, don't forget this bump in costs starting in 2018. It will be based upon your 2016 taxes:

https://www.linkedin.com/pulse/higher-medicare-premiums-earners-starting-2018-rafael-gonzalez

These recent changes to Medicare’s income-related premiums will affect beneficiaries with incomes above $133,500 ($267,000 for married couples) by requiring them to pay a larger percentage of Part B and Part D program costs than they currently pay, beginning in 2018. "Beneficiaries with incomes above $133,500 and up to $160,000 ($267,000-$320,000 for married couples) will pay 65 percent of Part B and Part D program costs starting in 2018, up from 50 percent prior to 2018." As a result of this change, "monthly Part B premiums are expected to be $310 in 2018 for beneficiaries in this income group, rather than $238 that year, based on projections of Part B program costs from the Medicare Trustees."