Budget Deal Includes Protections for Medicare Part B Recipients

By on October 28, 2015 3:57 PM in Pay & Benefits, Retirement with 0 Comments
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Updated: August 25, 2016 7:22 PM

Image of Paul Ryan and John Boehner

Paul Ryan (R-WI) and John Boehner (R-OH)

Federal retirees who are also enrolled in Medicare part B will be glad to know that the budget deal put forth in the House includes language to protect them from a sharp increase in premiums.

Medicare part B recipients were poised to see a 52% rise in premiums starting next year due to a lack of inflation.

Under the “hold harmless” provision of the Social Security Act, the dollar increase in Medicare Part B premiums is limited to the dollar increase in an individual’s Social Security benefit. Without a 2016 cost-of-living adjustment (COLA) for Social Security benefits, about 70% of beneficiaries are held harmless from any increase in their Medicare Part B premiums, so the premiums will remain stable at $104.90 per month for most beneficiaries.

However, the remaining 30% of Part B beneficiaries who are not held harmless, including federal retirees who do not receive Social Security benefits, were on track to shoulder the full cost of the 2016 premium increase.

As projected by the Medicare Trustees, these individuals would have seen their premiums rise 52%, from $104.90 to $159.30 per month. If the hold harmless provision did not exist, all beneficiaries would see a much smaller increase of 15%, to $120.70 per month.

Per the budget agreement, the standard Medicare Part B premium baseline is projected to be $120.70 per month for 2016 meaning premiums will remain at $104.90 in 2016. For most beneficiaries who are not held harmless, premiums will rise to $120.70, plus a surcharge.

The surcharge will work as follows:

To make up for the lost revenue to the Medicare Trust Fund as a result of lower premiums, beneficiaries will be charged a monthly surcharge of $3, starting in 2016.

The $3 surcharge will not apply to those held harmless this year, but it will apply to those individuals in future years in which they are not held harmless. As such, for most federal retirees who do not receive Social Security, premiums are projected to be $123.70.  Medicare beneficiaries who pay higher premiums due to their income level would see their premiums adjusted from the $120.70 baseline, plus any surcharge. The surcharge is expected to last five years.

National Active and Retired Federal Employees Association (NARFE) President Richard G. Thissen praised the news in a statement, saying, “Millions of federal retirees have been justifiably concerned that they would face a steep increase in Medicare premiums next year for no other reason than that they do not pay their premiums from a Social Security check. We have received countless phone calls asking if leaders in Washington will do anything to prevent it, and with this agreement, they have.”

Thissen also added, “While I believe this is a good compromise for the 2016 premiums, Congress and the Administration must fix this situation once and for all. Millions of individuals should not have to live with this type of financial uncertainly just because their Medicare premiums do not come from Social Security.”

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About the Author

Ian Smith is one of the co-founders of FedSmith.com. He enjoys writing about current topics that affect the federal workforce.