Benefit Bulletin: September 2020

Benefit Bulletin: September 2020

Low-Income Health Programs, Working and Laid Off Workers Take the Biggest Hit When Medicare Part B Premiums Spike

By Rick Delaney, Chairman of the Board

In years when there has been no, or almost no cost-of-living adjustment (COLA), Medicare Part B premiums have spiked significantly.  TSCL is highly concerned that another Medicare Part B premium spike could occur again in 2021.  Medicare beneficiaries who are not protected by the special provision of law known as the Social Security “hold harmless” provision could get hit with significantly steeper premium costs in 2021, and it may take several years before the majority of beneficiaries see their net Social Security benefit grow again.

TSCL is concerned that the monthly base Part B premium could jump by more than $17.40 rising from $144.60 to more than $162.00 in 2021.   This doesn’t have to happen!  Congress can prevent this by providing an emergency COLA.

An excessively low COLA triggers an important provision of law that ensures an individual’s net Social Security benefit will not decrease from one year to the next because of an increase in the Part B premium.  That’s valuable protection.  But when the provision is triggered there’s no law which specifies how the unpaid portion of Medicare Part B premium increases (of those who are protected by the provision) will be financed.

In past years, Congress has chosen to allow this cost to shift to the 30 percent beneficiaries who are not held harmless.  The total cost increase is spread over far fewer people, instead of all beneficiaries, and those who are not protected pay a much bigger share of Medicare Part B costs.  This could happen again for the 2021 premium.

This cost shift hits includes retirees with the lowest incomes.  Specifically it hits their state Medicaid budgets that pay Part B premiums for low-income Medicare beneficiaries — about 19% of all Medicare recipients.  If Medicare Part B premiums go up by more than $17.40 per month in 2021, that would add yet another fiscal shock to state budgets that are already strained to the limit due to the coronavirus pandemic.

The 30 percent who are not protected by hold harmless include:

  • Low-income “dual-eligibles” — Medicare beneficiaries whose incomes are so low that they are also eligible for Medicaid. Part B premiums are paid on their behalf by state Medicaid programs.
  • High-income beneficiaries who pay an income-related surcharge in addition to the basic premium.
  • New Medicare enrollees.
  • People age 65 and older who have not started Social Security benefits, and who pay by check. Most of this group includes people who are still working or those who may recently have lost jobs but not yet started Social Security benefits.

There’s not much time to head off this situation.  We can’t let Congress think they can shrug and look the other way again this time.  A 2.5% COLA is the amount that the Congressional Budget Office estimated beneficiaries would get in 2021, and those funds are already factored into the Social Security spending projections for 2021.

TSCL is calling on Congressional leaders to make them aware of the situation and to propose a 2.5% Emergency COLA.