The Social Security Administration recently confirmed there will be no annual Cost-Of-Living Adjustment (COLA) increase to benefits next year. This is the third time since 1975 that Social Security beneficiaries won’t receive a COLA, because inflation is lower than one year ago.
The lack of Social Security COLA triggers an unusual situation with Medicare premiums. The majority of Social Security recipients have Medicare premiums automatically deducted from their Social Security benefits. Under a special “hold harmless” provision of law, most people who have Part B premiums automatically deducted from their benefits — about 70% — are protected from a reduction to their Social Security benefits when the dollar amount of increase in the Part B Medicare premium exceeds the dollar amount of the COLA increase. Their Part B premium will remain the same as 2015.
But when this situation occurs, any cost increases in the Medicare Part B premium are shifted over the much smaller remaining 30% who aren’t protected by law. The base Medicare Part B premium will rise/ is expected to rise [an astounding 52% from $104.90 per month in 2015 to $159.30 per month in 2016]. About 30% of Medicare beneficiaries will have to pay the higher premiums. Here’s a closer look at those who will be affected:
- People who do NOT have Medicare Part B premiums automatically deducted from Social Security payments. This category includes people who haven’t started Social Security yet as more adults 65 and over opt to work longer and to delay the start of benefits. It also includes some federal and state government workers.
- Nine million low-income “dual eligibles,” people who receive both Medicare and Medicaid benefits. Because their Part B premiums are paid for by state Medicaid programs the Part B premiums of dual eligibles aren’t deducted from their Social Security benefits. Instead, state Medicaid budgets will be “gut punched” by this unexpected cost, leaving residents of many areas facing higher real estate and personal property taxes to foot the unexpected bill.
- New Medicare enrollees. Since new Medicare enrollees will be paying Medicare premiums for the first time, they will have to pay the full base premium. This could Affect not only people turning 65 next year, but people who lose jobs or health coverage through previous employment.
- Medicare beneficiaries with incomes above $85,000 (individual) or $170,000 (joint). This category of beneficiaries already pays higher premiums on a sliding scale depending on income. The premiums of this group will be a corresponding 52% higher than 2015.
The federal government will be notifying beneficiaries and verifying what they will pay in Part B premiums in November and December. For more information about Part B costs, visit www.Medicare.gov.