Budget Deal Blunts Medicare Premium Spike, At Least for Now

As we have reported, about 30 percent of Medicare beneficiaries were facing a staggering 52 percent increase in their Part B premiums in 2016, and all beneficiaries would see a similar hike in their deductible unless Congress acted to change things. As it turned out, Congress did act. 

The recently passed Bipartisan Budget Act of 2015 will raise premiums about 15 percent for the unlucky 30 percent (about 16 million beneficiaries), and the Part B deductible will rise by about the same amount.  But beneficiaries will pay on the installment plan for being spared the full premium hike today.

As we explained in our earlier article, the nation's elderly and disabled Social Security recipients will not be receiving an increase in benefit payments next year.  The fact that Social Security benefits are not rising means that Social Security recipients whose Medicare premiums are deducted from their Social Security checks will not see an increase in their Part B premium, which has held steady at $104.90 since 2013.  By law, if Social Security benefits don’t rise, Medicare premiums deducted from checks can’t, either.  But this “hold harmless” provision does not apply to about 30 percent of Medicare beneficiaries, a disparate group that includes those enrolled in Medicare but who are not yet receiving Social Security, new Medicare beneficiaries, seniors earning more than $85,000 a year, and indigent beneficiaries who receive both Medicare and Medicaid benefits.  

These unprotected Medicare beneficiaries were facing a base monthly Part B premium of $159.30, with affluent beneficiaries paying even more. As a result of the budget deal, the base premium for this 30 percent of beneficiaries will be $120 a month. Meanwhile, the annual Part B deductible will increase to about $167 for all Medicare beneficiaries, rather than the $223 it would have reached had Congress not acted.

However, the reduced premium is really a loan from the U.S. Treasury to this 30 percent of Medicare beneficiaries, who will pay it back in slowly rising premiums over the next nine years or so.  These beneficiaries will see $3 a year (and more for wealthier beneficiaries) added to their regular monthly premiums until the loan from the Treasury is paid off.  And these 16 million beneficiaries could be facing the same problem in 2017 if Social Security benefits do not rise again or only slightly. 

See details on the budget deal, which also eliminates two lucrative Social Security claiming strategies.

Read more from the Washington Post on the Medicare premium increase (subscription may be required).