Who Wins and Who Loses From The Proposed Legislation For Medicare Part B Premiums?

Following an outcry by many groups, new legislation would reduce the premium increase facing Medicare Part B participants in 2016. However, some will benefit and some will not. The author explains who comes out on top and who doesn’t under the new law.

Following an outcry by many groups, including the National Active and Retired Federal Employees Association (NARFE), new legislation would reduce the premium increase facing Medicare Part B participants in 2016. As with most legislation, the result is two groups – winners and losers.

Winners. The 70 percent of Part B participants who have their premiums deducted from their monthly Social Security benefits and whose income is less than $85,000 (single) or $170,000 (joint tax return). Their premiums remain $104.90 per month. As long as inflation remains too low to justify a Social Security COLA, their Part B premium will remain at this level.

Losers. Everyone else age 60 and older who is enrolled in Medicare Part B or will enroll in the next five years. Medicare Part B participants who do not have their premiums currently deducted from Social Security benefits will see their premiums increase by 18 percent (to $123.70 per month) or more for high income seniors. While this increase is less than the 52 percent originally proposed by the Trustees, it is far above the current rate of inflation and comes without any offsetting increase in Social Security or federal retirement benefits. It includes a $3 per month surcharge to repay the loan Congress is taking out to make up for the revenue lost to the Medicare Trust Fund in 2016 as a result of lower premiums.

People who were delaying receiving Social Security or who turn 65 in 2016. Their Part B premiums will rise also to the new amounts because they are also not having their premiums deducted currently from their Social Security benefits. Their premiums will also include the $3 per month surcharge.

People age 60 to 64 who will enroll in Medicare Part B over the next five years. Congress will require them to also pay the $3 monthly surcharge once they join Medicare Part B, even though the loan covers only shortfalls to the Medicare Part B fund in 2016. If there are additional shortfalls in 2017 or beyond, this will have to be made up in some other way.

“Everyone who is not held harmless in the future will pay the surcharge until the money to prevent the 52% increase is paid back. The budget agreement estimates that to be 5 years,” explained NARFE’s Legislative Director Jessica Klement.

Part B participants who have their premiums deducted from Social Security do not get off completely free. Due to the hold harmless clause in the Social Security Act, they will not have to pay the $3 monthly surcharge in 2016, but it will be added to their premiums beginning the year that they receive a Social Security COLA sufficient to allow Trustees to increase premiums. This group can anticipate that whenever they next receive a Social Security COLA, their monthly payment will be at least $3 less than it would be otherwise.

Richard Thissen, NARFE’s national president characterized the deal by saying: “This fix may not be perfect, but in a deeply polarized Congress, to have achieved a bipartisan compromise is a major victory.”

The proposed legislation says that this surcharge will be discontinued once the current loan is fully repaid to the Treasury.

Part B Monthly Premiums for 2016 as outlined in the proposed legislation

File individual tax return

File joint tax return

2016 Monthly Premium + Surcharge

$85,000 or less and premium deducted from Social Security benefits $170,000 or less and premium deducted from Social Security benefits $104.90 + $0 = $104.90
$85,000 or less and premium not deducted from Social Security benefits $170,000 or less and premium not deducted from Social Security benefits $120.70 + $3 = $123.70
Above $85,000 up to $107,000 Above $170,000 up to $214,000 $223.00 + $3 = $226.00
Above $107,000 up to $160,000 Above $214,000 up to $320,000 $318.60 + $3 = $321.60
Above $160,000 up to $214,000 Above $320,000 up to $428,000 $414.20 + $3 = $417.20
Above $214,000 Above $428,000 $509.80 + $3 = $512.80

 

About the Author

Michael Wald is a public affairs consultant and writer based in the Atlanta area. He specializes in topics related to government and labor issues. Prior to his retirement from the U.S. Department of Labor, he served as the agency’s Southeast Regional Director of Public Affairs and Southeast Regional Economist.