How Much Will Medicare Premiums Rise in 2016?

For only the third time in the past 40 years, Social Security benefits will not be adjusted for the cost of living as determined by the Cost of Living Analysis (COLA). This is good news for some, and not-so-good news for others.

Who will it effect?

70% of Americans are protected by the “held harmless” provision, which states that a higher cost of Medicare Part B premiums cannot be passed onto low-wage earners if there is no increase in Social Security benefits.

That means that 30% of Americans will have to pick up the tab.

When Medicare premiums rise rapidly, retired and highly-paid participants are expected to pay a greater share. Three groups of people should plan to see an increase in their Medicare premiums in 2016: new enrollees, high-income retirees, and individuals who chose to suspend their benefits.

Specifically, the hold-harmless provision does not protect individuals with a modified adjusted gross income of over $85,000 who are receiving Medicare benefits or married beneficiaries earning a combined $170,000.  The rate hike will also affect 2016 Medicare enrollees and current Medicare beneficiaries who opted to suspend their benefits.

Why is it going up?

Social Security benefits are assessed by comparing the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W or CPI) from the current year’s third quarter with the third quarter of the previous year.  So far, the CPI in 2015 is lower than 2014; this means that there will be no increase in Social Security benefits to square the cost of Medicare premiums with the cost of living.

People who see an increase in premiums will be paying specifically for Medicare Part B, which covers both hospital services and prescription drugs.

As of 2007, Part B premiums have been based on beneficiary income through the held harmless provision. Those with lower incomes are not held accountable for increases in Part B costs. That means that with no COLA adjustment to benefits, everyone not “held harmless” will have to pay a greater share of the total.

How much will it rise?

That depends on a variety of factors. Most important is your income. If you earned less than $85,000 in 2014, you paid a little over $100 in Part B premiums. If you earned between $100,000 and $214,000, you paid between $200 and $335.

In 2016, those who earn less than $100,000 who are held harmless won’t have to pay anything. Those not protected by the held harmless provision may pay up to $500.

More information?

The dynamic legal team at Cohen& Burnett is here to help you. Read our previous blogs for more updates, or visit our website for more detailed information on our services.

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