Editor’s Note: Journalist Philip Moeller, who writes widely on health and retirement, is here to provide the Medicare answers you need in “Ask Phil, the Medicare Maven.” Send your questions to Phil.
Medicare rules and private insurance plans can affect people differently depending on where they live. To make sure the answers here are as accurate as possible, Phil is working with the State Health Insurance Assistance Program (SHIP) and the Medicare Rights Center (MRC).
Edward: I read about there being a big increase projected in Medicare Part B premiums next year. However, I understand that if people began this year to have their Part B premiums withheld from their Social Security payments, they would not pay higher Part B premiums in 2016 due to Social Security’s “hold harmless” rule. If this is the case for 2016, I wondered if there also is no Social Security COLA [cost of living adjustment] for 2017, would this also be the case that year? And would any savings continue, in theory, for the rest of a person’s life?
Phil Moeller: Edward’s question and many others on this topic have risen to the top of the Maven’s inbox of late. He is referring to a very complicated but also potentially very big hike in Part B premiums that might be levied on some Medicare beneficiaries in 2016.
As you read on, keep in mind that these projected increases have not been formally adopted. Further, there is not a lot that affected people can do to avoid them. However, by the time 2017 premiums are set this October, it will be too late for even the limited responses I’ve laid out below.
People who have claimed Social Security benefits and are on Medicare must, by law, have their Part B premiums withheld from their Social Security payments.
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Most Part B premiums are paid out of people’s monthly payments from Social Security, and it has what’s called a “hold harmless” provision. According to this rule, Social Security benefits can’t decline from one year to the next. Normally, this is not a problem for Medicare. Each October, Social Security announces a cost of living adjustment (COLA) for the following year. Medicare can then boost Part B premiums and these higher payments will be taken out of people’s COLA-adjusted Social Security benefits.
But what happens when the COLA is zero, as it’s forecast to be next year? Medicare beneficiaries who pay the lowest Part B premium directly to Social Security — about 70 percent of all beneficiaries — can’t be required to pay any premium increases at all next year.
Unfortunately, Medicare is not able to just absorb all those projected increases in 2016 Part B expenses. By law, it must collect about 25 percent of Part B expenses from beneficiaries. Because it can’t collect any more dollars from the 70 percent of beneficiaries who are held harmless, it must seek to achieve this 25-percent ratio by collecting a lot more from people who aren’t held harmless.
The trustees thus projected these folks would pay 52 percent more in Part B premiums next year.
This group includes new enrollees to Medicare in 2016, people with modified adjusted gross incomes (MAGI) above $85,000 ($170,000 on joint tax returns) and those who pay their Medicare premiums directly to Social Security, because they haven’t yet begun receiving Social Security benefits. People with low-incomes who have their premiums paid by their state are also not held harmless, so state budgets also would take a hit next year.
New enrollees and Medicare beneficiaries who aren’t on Social Security — and who do not have high incomes — would thus pay not $104.90 a month in 2016 but $159.30. People in the higher-income premium groups would have similar percentage hikes, from a range of $146.90 to $335.70 a month in 2015 to a range of $223 to $509.80 in 2016.
Medicare officials say they will do what they can to reduce these increases while still honoring their funding obligations to support Part B expenses. Congress also could provide stopgap funding, although it’s hard to see them doing so.
In the meantime, the only strategy to avoid these increases is for people paying their premiums directly to Social Security to sign up for Social Security before the end of the year and begin having their Part B premiums automatically deducted from their Social Security payments. If they do so in the next couple of months, they should be held harmless in 2016. This can be a complicated decision to unwind, so it’s important that you consider all the reasons to take or not take Social Security at this time.
In answer to Edward’s question, if there was no COLA in 2017 too, then people held harmless next year also would be held harmless in 2017. But he is not correct that any savings would continue for life.
Once COLAs resume — and they surely will — Part B premiums will “normalize” over time. People held harmless next year would pay more. And people not held harmless in 2016 would see their premiums decrease. After at most a few years, everyone without an income-based premium surcharge once again would pay the same Part B premium.
Lastly, there could also be some more financial heartburn from the Part B situation for other Medicare beneficiaries. The trustees’ report projected that the annual deductible for Part B Medicare expenses would also increase by 52 percent in 2016, from $147 to $223.
People on Original Medicare would be hit by this, except for those with plan C and F Medigap policies, which pay that deductible.
Most people with Medicare Advantage plans also would likely see little or no direct impact from a boost in the Part B deductible. Medicare Advantage health plans are free to set their own deductibles, and many do not charge one at all.
Jennie – S.C.: I am 69 years old. I am losing my health coverage due to divorce. I use little prescription medicine, have been diagnosed with osteoporosis, use physical therapy for back and arms and need mental and dental health care. I have serious issues because of failed oral surgery. What Medicare plan should I get and what supplemental coverage do I need?
Phil Moeller: Jennie, I literally feel your pain. I have had recurring dental issues and often feel I’ve helped send generations of dentists’ kids to college! I assume money is an issue for you, so this answer assumes you are watching your dollars closely, if not your pennies. Medicare covers almost no dental work — only surgeries in limited situations — and does not cover ongoing dental care, which you clearly need. Medicare supplement plans, or Medigap, don’t cover dental either. Some Medicare Advantage plans do provide some dental coverage. This is where I’d start.
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Medicare Advantage (MA) must cover at least everything covered by Original Medicare (Part A for hospital and Part B for doctors, outpatient services and medical equipment). Most Medicare Advantage plans offer more coverage, including dental, vision and built-in Part D drug plans (a Part D plan is a separate policy for people on Original Medicare). The reasons Medicare Advantage plans can offer more coverage is complicated, but one major reason is that most Medicare Advantage plans save money by requiring you to use doctors, hospitals and other providers who are in their local network. Original Medicare, which often is also called fee-for-service Medicare, lets you use participating doctors and other health care providers anywhere in the country.
I suggest you visit Medicare’s Plan Finder website. Enter your ZIP code and do some careful comparison shopping to see if there is an Medicare Advantage plan that includes the dental coverage you need. If not, you will have to seek a separate dental insurer, and the premiums for a 69-year-old person with a history of dental issues will hardly be cheap. Medicare plans, by contrast, cannot refuse to cover you because of prior conditions. Call the South Carolina SHIP office at 1-800-868-9095 and ask a counselor there to help walk you through your options. There is a lot to consider, and it really helps to speak with someone who has helped others navigate the process.
Last, but not least, don’t wait too long to do this. First, you do not want a break in coverage that leaves you exposed. Also, when your current health coverage ends, you should have an eight-month special enrollment period during which you can sign up for Medicare coverage. It’s important to get Medicare during this period so that you don’t get hit with late enrollment premiums surcharges.
Jim – Texas: My wife and I are both 66 with current Part A, B, D and Medigap G plans. We will be living and I will be working outside the U.S. in 2016 — at least 330 of 365 days — although my wife may be in the U.S. more days than I will. My insurance agent tells me if I cancel our Part G coverage while I am gone, I would be subject to underwriting if and when I return and reapply. Is it best to just bite the bullet and keep all the coverages in place while we are traveling and try to schedule doctor visits and medications when we are back between assignments?
Phil Moeller: Your agent is right about possibly paying a lot more for your Medigap plan if you drop it. These plans provide what’s called guaranteed issue when you are first eligible for them. This means they must cover you for pre-existing conditions and can’t “uprate” you for age or other factors. That’s not the case if you drop coverage and later seek to reinstate it. I know money is always a factor, but I’d recommend you keep all your Medicare coverages when you’re outside the U.S., especially if you’re only going to be gone for a year. Also, Medigap G plans do provide some coverage outside the states. Ask your agent about this, and decide if you need any additional foreign insurance.
DeeDee – Fla.: Is it true that there will be no new enrollments accepted into Medicare Supplement Plans C and F beginning in January 2020?
Phil Moeller: No. What is true is that under terms of a new law (the Medicare Access and CHIP Reauthorization Act of 2015, or MACRA), beginning in 2020, these two types of Medigap plans will no longer be able to cover the annual deductibles for Part B of Medicare, which is $147 this year. However, you can still buy C and F plans in 2020. From now to then, you can continue to get C and F plans that cover the Part B deductible. And, if you have a C or F plan by the time 2020 rolls around, it will continue to cover the deductible in later years, even though newly sold plans will not.
Mark – Calif.: I have been on SSDI (Social Security Disability Insurance), Medicare and Medicaid for 20 years. I have just turned 65. My share of Medicaid costs me $700 a month, and as SSDI is my only income, I can barely pay my Medicare Parts B and D payments, so supplemental insurance is out of the question for now. Was something supposed to change when I turned 65? Is there a better way to do this all?
Phil Moeller: Nothing changes when you’re on SSDI and turn 65. Next year, when you turn 66 and reach what’s called your full retirement age, your SSDI payment automatically converts into a normal Social Security retirement payment. However, you will not get any more money beyond cost of living increases (and they’re supposed to be zero next year). There are numerous low-income supports for Medicare beneficiaries. Perhaps you have checked all of them out. If not, call a California SHIP counselor at 1-800-434-0222 and ask about Medicare Savings Programs and the Extra Help program for assistance paying Plan D expenses.