Congressional leaders and the Obama Administration have fixed the potentially alarming increase in Medicare Part B premiums 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 that had to be fixed 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.
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 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, they will experience a more modest 14% premium increase, 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.
About the Author: Bob Veres has been a commentator, author and consultant in the financial services industry for more than 20 years. Over his 20-year career in the financial services world, Mr. Veres has worked as editor of Financial Planning magazine; as a contributing editor to the Journal of Financial Planning; as a columnist and editor-at-large of Dow Jones Investment Advisor magazine; and as editor of Morningstar’s advisor web site: MorningstarAdvisor.com.
Mr. Veres has been named one of the most influential people in the financial planning profession by Investment Advisor magazine and Financial Planning magazine, was granted the NAPFA Special Achievement Award by the National Association of Personal Financial Advisors, and most recently the Heart of Financial Planning Distinguished Service Award from the Denver-based Financial Planning Association.
The Obama administration and congressional leaders have finally reached a tentative budget agreement that will prevent a 52 percent spike in Medicare premiums for millions of Americans. Without the bipartisan budget deal about 17 million Medicare recipients would see their Medicare Part B premiums soar from $104.90 to about $160, USA Today reports.
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