Expect Higher Medicare Premiums in 2017

“Hold Harmless” Will Become News Again

To many, a new phrase entered Medicare beneficiaries’ vocabulary last year. That phrase is “hold harmless.” This single phrase had ripple effects last year, and it is very likely going to be the case again this year.

 

What Happened Last Year

When Social Security has zero COLA adjustments, the bottom line is that Medicare Part B premiums cannot increase for people who are currently Medicare beneficiaries and received Social Security benefits during November and December of the prior year. Last point is that the person cannot have exceeded the $85,000 ($170,000 married couple) income threshold. That is the threshold that exposes a Medicare beneficiary to higher Part B premium.

At the end of last year, it was announced that there would be no COLA adjustment for 2016. It took a last moment agreement in order to limit the increase the 2016 Medicare Part B premium for new beneficiaries. There were other modifications to Medicare, which will take effect in 2020 (Medigap plans C and F will no longer be available to new Medicare beneficiaries, existing beneficiaries will be able to keep their policies).

As a result of the “hold harmless” provision, that basically meant that the funding had to come from “somewhere,” which meant higher Part B premiums for new beneficiaries, and higher premiums for those that exceed the $85,000 ($170,000 household) threshold. It could have been more than $150 a month for these new beneficiaries. The Bipartisan Budget Act of 2015 limited the increase of Medicare Part B premiums to $121.80 a month. This was made possible due to the closing of certain unintended loopholes for married couples that collect Social Security benefits (“file and suspend” strategies).

 

IRMAA Increases

For those that earn more than $85,000 (modified adjusted gross income, as measured two years prior, and $170,000 for married couples, it is not only that IRMAA will continue to exist, but the amount, and the percentage increased, and will continue to increase. For those that are fully employed and choosing whether or not to enroll in employer-provided health insurance, this will add a layer of complexity to the decision-making process.  

COLA Increases Unlikely for 2017 Means That…

Economists that are keeping track of CPI, the statistic on which COLA is based, have noted that for 2017, it is very likely that COLA will not increase. The almost-inevitable result of this will be that the “hold harmless” provision will likely become a topic in the public view again, during a federal election season, and without further legislative action, further increases to the Part B for new Medicare beneficiaries, and those that are subject to IRMAA, is very likely.

 

Medicare 2016 Changes

My blog post as Expert Contributor to Humana-powered website, www.mymedicareanswers.com, is here.

Medicare 2016 Changes

There are some changes to Medicare that are forthcoming, above and beyond the changes announced in the headlines.

Please see an updated grid of original Medicare rates here.

Higher premiums

In 2016, the Part B premium will not increase for 70% of existing Medicare beneficiaries. Originally, an increase of greater than 50% was supposed to occur, but last-moment legislative action prevented this. Therefore, only new Medicare beneficiaries and high-income earners (subject to IRRMA) will face higher Part B premiums. Bottom line: existing Medicare beneficiaries that earn less than $85,000 ($170,000 for married couples) will face no increase in Part B premiums. New enrollees will not be as fortunate: $121.80 a month will be the monthly Part B premium.

Higher Deductible and Copays

In 2016, the Part A deductible will be $1288.00 per benefit period, from $1260.00 in 2015. The Skilled Nursing Facility coinsurance amount will be $161.00 per day, during days 21-100. The Part B deductible will be $166.00 for the year. It is important to note that the “hold harmless” provision that would’ve protected 70% of Medicare beneficiaries (when Social Security benefits do not increase) does NOT protect beneficiaries from Part A or Part B deductibles or copays.

IRMAA

For high-income earners, Medicare Part B and Medicare Part D adjustments will increase. The reality is that the increase is the result of two factors. First, the “permanent doc fix” enacted in April 2015 made an initial increase in the IRRMA. Second, the last-minute budget deal during November 2015 created a second increase. This means that while the second factor may decline, the first reason for an increase in IRMAA will remain intact. Further, you must remember that IRRMA is, in fact, a “rate,” not an “amount.” The “permanent doc fix” has legislated a higher rate, which implies that if Part B increases, then the IRRMA will increase by a higher rate, meaning that the IRMAA will also be higher.

Two-Midnight Rule

Retroactive to October 1, 2013, the much-discussed “two-midnight rule” will take effect. This means that if you are admitted to the hospital, and that hospital stay is expected to cross two midnights, then you will be presume to have inpatient hospital status. This is very important because it addresses many misunderstandings regarding Part A. First, inpatient hospital status means that Part A will be the coverage, and not Part B. Second, and related to the first point, Skilled Nursing Facility care can be covered by Part A, if your hospital stay lasts over three midnights.

It has been the case that Medicare beneficiaries have been unaware of their patient status in a hospital, and then have been transferred to a Skilled Nursing Care facility. If the patient was not admitted on an inpatient basis, then the Part A benefit under Skilled Nursing Facility care would not apply, but instead, would be covered by Part B (with 20% coinsurance, after covering the Part B deductible). Under the “two-midnight rule,” one important layer of this confusion should be resolved. It is important to note that the three-day criteria still remains in effect. A patient must be both admitted on an inpatient basis, and that hospital stay must cross three midnights, in order to be covered by Part A at a Skilled Nursing Care facility.