– By Karin Maloney Stifler
Congressional leaders and the Obama Administration have resolved 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 arose under Social Security and Medicare rules which require the government 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 when there is no increase in Social Security benefits—such as in 2016—Medicare premiums must stay the same for current Social Security recipients. As a result, the entire increase in Medicare costs would fall to enrollees who either don’t yet collect Social Security; 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 in 2016. Instead of seeing monthly premiums increase 52% from $104.90 to $159.30, they will experience a more modest 14% premium increase, to $120 a month, plus a monthly surcharge of $3. This “fix” will allow premiums to rise more gradually, and spread the cost over a longer period of time.