Millions of Medicare recipients who were dreading a 52% premium increase may not have to worry much longer thanks to a bipartisan budget deal the House passed on Wednesday, October 28th. The Senate is due to vote soon.
Lower Increases in Part B Premiums
The budget deal, if it passes through Congress, will substantially reduce the increase in Medicare Part B premiums and deductibles that would otherwise take effect in 2016. Without the deal, approximately 30% of the 54 million people with Medicare coverage would have seen Part B premiums jump 52% in 2016, from a base rate $104.90 per month to $159.30. If the proposed budget deal goes through, however, those 17 million beneficiaries will instead see their Part B premiums rise just 14% instead, to a new base rate of $120 per month in 2016, plus a $3-per-month surcharge. A savings, over the course of a full year, of a little over $430.
Higher-income beneficiaries (those subject to Medicare’s income-related monthly adjustment amount), however, will still find themselves paying more than $120. Although the premium amounts for those beneficiaries has not been released yet, experts have calculated a range from about $168 to $384, plus the surcharge.
In addition to a lower increase of premiums, under the budget proposal the annual deductible for Medicare Part B, currently $147, would only increase to about $167 for all beneficiaries, rather than the $223 projected under current law.
The 30% of Medicare beneficiaries who are facing the premium increase includes new Medicare enrollees who will start benefits in 2016; enrollees who do not receive a Social Security benefit check; enrollees subject to the income-related premium adjustment; and dual Medicare-Medicaid beneficiaries, whose premiums are paid by state Medicaid programs.
The majority (approximately 70%) of Medicare beneficiaries, however, will not see any increase in their Medicare premiums next year due to a provision of federal law which links premiums to Social Security benefits, which will be frozen in place in 2016 because of a year of unusually low inflation. Next year, for the third time in 40 years, Social Security will not be providing a cost-of-living adjustment in benefits.
Holding off on the increases in Part B premiums is anticipated to cost about $7 billion or more in 2016. To deal with those costs, however, the agreement calls for the lost revenue to be covered by a federal loan from Treasury general funds and paid back over time. Beneficiaries who would have seen the 52% premium hike will pay back the loan through the $3-per-month charge, which are expected to apply for the next 5 years.
Praise for Medicare Budget Proposal
AARP, the non-profit, non-partisan organization who represents the interests of about 38 million Americans who are 50 and older and their families, was among those praising the proposed legislation.
“Congress is helping to prevent financial hardship for many beneficiaries at a time when there is no Social Security cost-of-living adjustment,” Jo Ann Jenkins, chief executive officer of AARP, wrote in a letter to the Senate and House leadership.
Judith Stein, founder and executive director of the Center for Medicare Advocacy, also gave praise for the budget proposal, “While we have concerns about the way in which the Part B cost-sharing resolution is paid for, we are glad people who rely on Medicare can breathe a bit easier – knowing their premiums and deductible will not skyrocket next year.”