Some Medicare Beneficiaries Will See 15% Premium Hike in 2016

Roughly 30% of Medicare beneficiaries will be affected.

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The Bipartisan Budget Act of 2015 addressed the Medicare funding shortfall the way they have addressed problems in the past – they will borrow the money. The bill calls for a $7.5 billion loan from the U.S. Treasury to help cover expenses.

The problem arose from a rule prohibiting Medicare premium increases in a year when Social Security income doesn’t increase with inflation. The “hold harmless” rule comes in to play in 2016 because there is no cost-of-living adjustment for benefit checks. This is only the third time in 40 years that Social Security will not provide a cost-of-living adjustment in benefits. Unfortunately, someone has to pay for the increased costs of Medicare. These costs would have been passed on to the roughly 30% of Medicare beneficiaries who were drawing benefits for the first time in 2016 or were in the upper income levels where premiums are already higher – a 52% increase!

The loan agreement limits the Part B premium increase for these 30% to 15% in 2016. First year Medicare beneficiaries will pay $123 per month while the premiums for the 70% already on Medicare will remain at $104.90 per month thanks to the “hold harmless” rule. However, all loans must be repaid. In 2017 all Medicare beneficiaries will need to help pay back the loan. It has been estimated the amount will be an additional $3 per month premium payment. Officially, Medicare will assess how to handle future loan payments at that time. The total premium amounts may end up being higher or lower depending on how the program performs.

The 70% of Part B beneficiaries held harmless will not be completely unaffected. Deductibles will rise 15% next year—from $147 a month to about $167.


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