Ask the Adviser: Why are Medicare Part B premiums going down when inflation is up? - Rodgers & Associates

Ask the Adviser: Why are Medicare Part B premiums going down when inflation is up?

The Centers for Medicare & Medicaid Services (CMS) announced that Part B premiums will be going down in 2023. These premiums were $171.10 a month in 2022, and the CMS reported that they’ll be $164.90 in 2023—a 3.06% decrease. This probably has a lot of people stumped. If inflation were up roughly 8% last year, how could Medicare premiums possibly be going down?

To under­stand how we got here, we need to go back to 2021. In October of that year, officials announced that Medicare Part B premiums for 2022 would increase 14.5%, rising from $148.50 to $170.10 a month. This was the fourth-largest increase in the history of Part B. Inter­est­ingly, it had to do with an extremely expensive drug designed to slow the progression of Alzheimer’s Disease, called Aduhelm™. Let’s look at the timeline of how this happened.

June 2021 – The FDA approved Aduhelm through an accel­erated approval process. (The approval was contro­versial, as it ran against an independent advisory panel’s recommendation.)

November 2021 – Medicare announced an increase in Part B premiums from $148.50 a month to $170.10 a month in 2022. This calcu­lation assumed that Aduhelm would cost $54,000 a year per patient (!) and that an “uncertain” number of patients would take the drug.

December 2021 – The drug maker announced it would cut the price of the drug from $54,000 to $28,200 a year per patient.

January 2022 – The CMS proposed that only medication for patients in quali­fying clinical studies should be covered. Shortly after that, Health and Human Services Secretary Xavier Becerra commis­sioned a study to revisit the assump­tions that led to Part B premiums.

May 2022 – Secretary Becerra announced the study results, which revealed that premiums should only be $160.40 based on the updated pricing and scope for the Alzheimer’s drug. The study reported that a midyear adjustment wouldn’t be opera­tionally feasible, hence the lower price for 2023.

So, accounting for the overpayment from last year, the reduced future cost of Aduhelm, and an increase in costs due to inflation, the net effect is that premiums will be $5.10 lower in 2023 than they were in 2022. You might argue that this isn’t exactly fair. Say you overpaid last year, and your friend just enrolled in Medicare for the same price as you. One easy way to right this wrong? Next time you’re out to dinner together, cite this as the reason they should pick up the check.