COLA Hike Might Bring Big Medicare Premium Increases
October 18, 2016 03:51 PM
Social Security’s annual cost of living adjustment (COLA) will be 0.3 percent in 2017, the federal government announced Tuesday. The increase could mean a large premium increase for many Medicare Part B beneficiaries. The COLA is pegged to consumer price inflation (CPI) in the year that ended last September.
It is unclear how much Medicare premiums might increase, though a hike of 22 percent was projected by the Medicare trustees earlier this year. Though Medicare has not announced the final 2017 premium increases, word on that could come in the next few weeks. Last year the Department of Health and Human Services made the announcement on November 10, 2016
According to the 2016 Medicare Trustees Report, Part B premiums are currently scheduled to increase from $121.80/month this year up to $149/month, a bump of 22 percent. The trustees also estimate the Part B deductible will rise from $166 to $204 next year for all enrollees. Those numbers are only estimates and the actual figures could well be different.
The increase is happening because of a “hold harmless” provision that forbids Medicare Part B premium increases from being larger, in dollar amount, than the beneficiary’s Social Security cost-of-living-adjustment (COLA). This rarely matters because Social Security benefits are much larger than a beneficiary’s Part B premium.However, there was a zero COLA last year and a mere 0.3 percent this year. Therefore, the hold harmless provision is triggered, leaving about 30 percent of beneficiaries with a substantial increase in their Medicare Part B premium and deductible. That 30 percent will have to foot the bill for a premium increase that would normally be spread among all Medicare beneficiaries.
Those affected by the increase include:
New Medicare beneficiaries;
Beneficiaries who have not started receiving Social Security;
Low-income beneficiaries who have their premiums paid by Medicaid;
High-income beneficiaries who pay higher premiums between 35 and 80 percent of program costs; and
Certain state and local employees who do not participate in Social Security.
Last year, when there was no COLA adjustment for Social Security benefits, Congress reduced a big increase in Part B premiums affecting about one-third of Medicare recipients. However, that fix only applied to that year and does not cover 2017.
Late last month NAHC and a group of about 75 health care and employee groups sent a letter to Congress on September 27 urging lawmakers to prevent the increase in out of pocket health care costs from occurring.The legislative fix required to remedy this situation is fairly simple, involving the modification of the 2017 safeguard put in last year’s budget deal to apply even with a COLA that is low, but not zero.
"Seniors in Medicare expect their health costs to be affordable and stable, and I'll be looking at every option in the days ahead to make sure that remains the case," said Senate Finance Committee ranking member Ron Wyden (D-Ore.) in a statement.
The CPI index is used to set the COLA, though it has often been criticized for under-estimating actual inflation for things older Americans consume disproportionately, such as health care.
We will continue to monitor and advocate on this issue so stay tuned to NAHC Report for further developments.