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No Social Security increase means a big Medicare headache for recipients

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.


As Medicare’s annual open enrollment season gets underway, the biggest news is an unknown: How much will Part B monthly premiums and annual deductibles rise in 2016?

These costs have been thrown up in the air by Social Security’s announcement that there would be no cost of living adjustment, or COLA, in 2016. Under Social Security rules, the lack of a COLA (which also happened in 2010 and 2011) means that Part B premiums cannot increase next year for about 70 percent of Medicare beneficiaries.

These are people who make less than $85,000 a year ($170,000 for couples filing joint tax returns) and have their monthly Part B premiums deducted from their monthly Social Security payments. They have been paying $104.90 a month for Part B this year, and they will continue to pay this same amount next year.

That’s because of Social Security’s “hold harmless” rule. It says Social Security payments can’t decrease from one year to the next. Normally, the COLA would permit Medicare to collect higher Part B premiums while still allowing net Social Security benefits to increase. But with a zero COLA, there can be no increase in Part B premiums for people who are held harmless.

Their good news, however, means very bad news for the 30 percent of Medicare beneficiaries who are not held harmless. Medicare is required by law to collect about 25 percent of Part B program expenses from beneficiary premiums. It thus has no choice but to collect all of this from people who are not held harmless.

Medicare trustees earlier in the year projected that a zero COLA would mean that Part B premiums would rise by 52 percent for this group, which includes 3.1 million seniors with above-average incomes, 2.8 million enrollers who will be new to Medicare next year and 1.6 million Medicare beneficiaries who aren’t paying Part B through Social Security, because they haven’t begun taking Social Security yet.

Low-income Medicare beneficiaries are also not held harmless. Their costs are paid by state Medicaid programs, putting pressure on state budgets.

In its annual report on Medicare released last summer, the trustees forecast these 2016 increases for different income groups:

  • For incomes below $85,000 ($170,000 if filing jointly), Part B premiums would rise from $104.90 to $159.30. (This is what newcomers to Medicare and those who pay premiums directly will pay next year if they are in the lowest income bracket.)
  • For incomes between $85,000 and $107,000 ($170,000 to $214,000 if filing jointly), Part B premiums would rise from $146.90 a month this year to $223.00.
  • For incomes between $107,000 and $160,000 ($214,000 to $320,000 if filing jointly), Part B premiums would rise from $209.80 a month this year to $318.60.
  • For incomes between $160,000 and $214,000 ($320,000 to $428,000 if filing jointly), Part B premiums would rise from $272.20 a month this year to $414.20.
  • For incomes above $214.000 ($428,000 if filing jointly), Part B premiums would rise from $335.70 a month this year to $509.80.

The measure of income used to calculate these brackets is called Modified Adjusted Gross Income, or MAGI for short.

The trustees also forecast a 52-percent jump in the annual Part B deductible from $147 this year to $223 in 2016. The deductible is the amount of covered Part B expenses that a beneficiary must pay before Medicare insurance coverage begins.

There have been discussions within Congress and Medicare to soften the impact of the Part B hikes, but nothing has been accomplished to date.

With open enrollment having begun and Social Security having already announced a zero COLA for 2016, the heat is on Medicare to quickly announce Part B costs for next year.