What’s New in Medicare for 2016Medicare Part B premiums are expected to increase in 2016, but not as much as many seniors had feared.
Before a new federal budget bill was signed, millions of Medicare recipients were bracing themselves for the double blow of significantly higher Medicare Part B premiums in 2016 coupled with no cost of living adjustment (COLA) to their Social Security checks in 2016. But the new budget bill is designed to put both Medicare and Social Security on a firmer financial footing and to fix some obvious flaws to the system having to do with spouses maxing out social security benefits.
Budget analysts predicted that the Social Security disability trust fund would run out late in 2016, and had this happened, checks to current disability recipients would have been reduced. Under the new budget bill, a portion of FICA taxes are reallocated to the disability trust fund sufficient to keep the fund going until 2022.
Medicare Part B Premiums and Deductibles for 2016
Before a new federal budget bill was signed in early November, nearly one-third of Medicare recipients were expecting their Medicare Part B premiums and deductible to increase by 52%. However, the new budget bill has managed to keep those increases to around 13.4% instead. This is welcome news for around 17 million Americans, who expected their Medicare Part B premiums to rise from $104.90 per month to $159.30 per month. They’ll still go up, but only to about $119 per month. The other approximately 70% of Medicare Part B beneficiaries will continue to pay the same $104.90 premium they paid in 2015.
Those recipients paying higher premiums in 2016 will also pay an $3 to $9.60 per month, depending on income, to help pay back a loan the US government gave Medicare to help offset lost revenue.
Part B Premiums, COLA, and “Hold Harmless”
Approximately 70% of Medicare Part B members wouldn’t have seen a premium increase in 2016 anyway. This group, which pays $104.90 per month deducted from their Social Security benefits, is protected under “hold harmless” Social Security regulations that dictate when there’s no Social Security COLA, Medicare premiums deducted from Social Security must remain the same.
Most years, Social Security beneficiaries receive an annual COLA that reflects higher general costs associated with inflation. The amount of the COLA is based on changes in the Consumer Price Index from July through September of the current year compared to July through September of the most recent year a COLA was determined. Dramatic declines in energy costs (especially gasoline) in 2015 outweighed moderate inflation on other consumer goods. Based on this, the Social Security Administrations announced in October that there would be no COLA for 2016.
Who Should Expect Higher Medicare Part B Premiums in 2016
Essentially three groups of people can expect to pay more than $104.90 in Medicare Part B premiums for 2016:
• Higher-income Medicare recipients
• People with Medicare Part B who do not receive Social Security benefits
• New Medicare enrollees for 2016
The higher-income Medicare beneficiaries are those with adjusted gross income of over $85,000 for individuals or $170,000 for couples. In addition to the standard Part B premium, these people will pay an income-based surcharge. People who receive Medicare Part B but don’t receive Social Security are not protected by the “hold harmless” provision under which Social Security beneficiaries are protected, so many of these people can expect higher premiums in 2016. Finally, people who are new to Medicare in 2016 won’t “feel” the increase in Medicare Part B premium in 2016 (because they haven’t paid it before), and so they are not protected under the “hold harmless” provision. New Medicare recipients include:
• People who will reach age 65 in 2016 and sign up for Medicare Part B
• People under 65 on Social Security Disability Insurance payments who exit their 24-month waiting period and go on Medicare in 2016
• People who worked beyond age 65, but who sign up for Part B in 2016
Medicare Part D Premiums for 2016
Medicare Part B premiums aren’t the only concerns seniors face in 2016. Most people enrolled in Medicare Part D prescription drug benefit coverage will pay higher premiums next year unless they switch to another, less expensive plan during Medicare Open Enrollment, which runs through December 7. Additionally, cost-sharing requirements and deductibles are also expected to increase for most people who stick with the same Part D plan. Other changes to Medicare Part D expected include:
• Fewer plans to choose from (an average of 26, versus 30 in 2015)
• Premium increases for high-income recipients in the form of a monthly surcharge on Part D premiums. Surcharges range from an additional $12.70 to $72.90 per month.
• Increase in deductible for Part D from $40 to $360 – the biggest since Part D was enacted
• Higher out-of-pocket costs for more expensive medications (those costing over $200 per month)
• Smaller “donut hole” coverage gap, affecting those who spend between $3,310 and $4,850 out of pocket on prescription drugs
• More plans with preferred pharmacy networks (around 85%, compared to 7% in 2011)
Instead of Medicare Part A and B (Original Medicare), some beneficiaries choose to enroll in a Medicare Advantage program, also known as a Medicare Part C program. With Original Medicare, the government pays for Medicare benefits. With Medicare Advantage plans, private companies approved by Medicare offer plans that provide all Medicare Part A (hospital) and Part B (outpatient) coverage. Some of these plans offer prescription drug coverage and some do not. Medicare Advantage plans, which are not the same as Medigap insurance for Part A and Part B recipients, premiums are expected to rise in 2016.
Since Medicare Advantage users can only change plans (or return to Original Medicare) during Medicare Open Enrollment through December 7, all Medicare Advantage enrollees are encouraged to check with their plans for premium increases to make the best choice for coverage in 2016.
Medicare will cost more for around one-third of recipients in 2016. These recipients primarily include new enrollees and high-income participants, who will face higher premiums and the addition of Medicare Payback charges of around $3 to $9 per month. Those who enroll in optional Medicare Part D prescription drug plans as well as those who enroll in Medicare Advantage plans are encouraged to check their current plans and compare to what those same plans have in store for 2016 before Open Enrollment ends.
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