Medicare Bombshell?

September 15, 2015

logo_medicareIf published reports turn out to be accurate, it seems likely we’ll be hearing plenty about this in the coming months. A quirk in the rules for Medicare Part B may result in a huge jump in costs — but only for 30% of enrollees.

Ironically, the problem stems from an attempt to protect people enrolled in the program. Congress inserted a provision in the law saying that if you’re paying the base rate, currently $104.90, and having your Medicare Part B payments deducted from your Social Security checks, the increase in your Medicare premium will be limited to the amount of the increase in your social security payment. This rule, protecting people from seeing a decrease in the net amount they receive in their Social Security checks, makes a lot of sense.

The problem is that this rule prevents the Medicare program from collecting as much as it needs from these protected individuals, and Congress didn’t provide a source of funds to make up for that shortfall. The program may have to make it up by increasing the amount it collects from other participants: people who are on Medicare but paying higher premiums, or not having their premiums deducted from Social Security checks.

This is a particularly severe potential problem this year because it appears likely that there will be no adjustment in Social Security checks at all this year, while Medicare costs are going up. If the increase in Medicare costs were spread evenly among all participants, the base premium of $104.90 this year would rise to an estimated $120.70. But with 70% of the participants protected from any increase at all, the entire increase has to be borne by the remaining 30%, leading to a premium estimated at $159.30, an increase of more than 50%. Steep increases could also apply to people who are paying higher rates already due to their income levels.

It’s possible the Secretary of Health and Human Services will take action to ameliorate the increase, and also possible Congress could step in to provide some relief. Some people may be able to avoid the problem by altering their Social Security claiming strategy, although the cost of a change there might be greater than the savings in Medicare costs. Stay tuned.

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