Medicare Fix-It

by P.J. DiNuzzo                                                                                                November 5, 2015

Medicare Fix-It

Congress has 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. 

Sincerely, 

P.J. DiNuzzo, CPA, PFS®, AEP®, AIF®, MSTx, MBA
President, Founder, and Chief Investment Officer