By reevaluating supplemental and prescription drug coverages, Medicare enrollees can make up for premium increases
Dec 14, 2016 @ 10:00 am
Recently, I wrote about the estimated 22% escalation in Medicare Part B premiums and Parts B and D high-income surcharges. Contrary to what the Medicare Trustees projected, the Centers for Medicare and Medicaid Services (CMS) approved a 10% increase that will affect only 30% of all Medicare beneficiaries.
On top of that, the majority of current Medicare enrollees, about 70%, will not even pay a 10% increase in their Medicare Part B premiums. Why? Because of the statutory hold harmless provision. Given that the 2017 Social Security COLA was only 0.3%, the hold harmless provision limits any increase in Medicare Part B premiums beyond any increase in Social Security benefits in a year. This rule protects most of the folks on Medicare from paying more for their coverage than their incomes can sustain.
(More: Where will Medicare costs go in 2017?)
Because of the hold harmless provision, Medicare Part B premium increases are a few dollars for 70% of the beneficiaries. On average, people in this category who now pay $104.90 per month for Part B will pay $109 per month in 2017. The official announcement does not address Medicare recipients who entered new into Medicare last year and pay $121.80 and meet the hold harmless criteria.
It is not clear what their Medicare B premiums will be next. A strict reading of the CMS announcement could lead to the conclusion that those people might pay $109 per month. Until CMS issues further guidance, that question remains unanswered. It is possible that premiums for individuals who pay $121.80 per month now may spend a few dollars more per month not less.
(More: These retirees will see a substantial increase in their Medicare premiums in 2017)
Medicare Part B enrollees who are not subject to the hold harmless will pay $134 per month. They include people who:
• do not receive Social Security benefits;
• enroll in Part B for the first time in 2017;
• billed directly for Part B premium;
• are dual-eligible Medicaid and Medicare beneficiaries and have their premium paid by state Medicaid agencies;
• pay high income-related premiums.
There will be at least two or three 2017 Medicare Part B premiums. They will vary based on what year the person started receiving Medicare Part B and whether they meet the hold harmless criteria. Individuals who entered into Medicare in 2015 or before will pay $109 per month. Folks who enroll in Medicare Part B in 2017 or are otherwise not held harmless will pay $134 per month. People who started Medicare in 2016 and meet the hold harmless criteria will either pay $109 per month or around $121.80.
CMS also released the high-income 2017 Income-Related Monthly Adjustment Amounts (IRMAA) for Medicare Parts B and D surcharges. The following table includes monthly Medicare Part B premiums and Parts B and D IRMAA surcharges. Married couples who file their taxes individually have slightly different income brackets and costs listed in this table.
2017 monthly Medicare B premium including IRMAA surcharge and Medicare Part D IRMAA surcharge
| 2015 MEDICARE MAGI | MEDICARE B PREMIUM & SURCHARGE | MEDICARE D SURCHARGE* | ||
|---|---|---|---|---|
| SINGLE FILERS | JOINT FILERS | MARRIED FILING SINGLE | ||
| ≤ 85,000 | ≤ $170,000 | ≤ $85,000 | $134 | $0 |
| ≤ $107,000 | ≤ $214,000 | NA | $187.50 | $13.30 |
| ≤ $160,000 | ≤ $320,000 | NA | $267.90 | $34.20 |
| ≤ $213,000 | ≤ $428,000 | ≤ $129,000 | $348.30 | $55.20 |
| > $213,000 | > $428,000 | > $129,000 | $428.60 | $76.20 |
Source: Dr. Katy Votava Notes: 2015 Medicare MAGI = Adjusted Gross Income + Tax Exempt Interest. The new 2017 Medicare Part B premium $134 is used here. Some beneficiaries will pay less due to the hold harmless statute. *Medicare Part D IRMAA surcharges are separate from and in addition to the Part D plan premiums.
You might be thinking: Is there any good news here? Yes, there is. Most people can save much more than Medicare premium increases by reevaluating their Medicare supplemental and prescription drug coverages. We see many cases where folks can save $2,000 to $6,500 annually by changing their coverage. The primary culprit is that their current prescription drug plans are either not covering all of their medications or not doing so at the lowest total cost.
(More: Low Social Security cost-of-living adjustment keeps Medicare premiums lower for most)
It is not too late for your clients to reevaluate their coverage. Although Medicare Annual Enrollment ended earlier this month, Medicare Advantage plan enrollees get another bite at the apple from Jan. 1 through Feb. 14. That time frame is known as the Medicare Advantage Disenrollment Period (MADP). Enrollees in Medicare Advantage can disenroll from that plan and enroll in a stand-alone Medicare Part D prescription drug plan.
I recommend they also consider enrolling in a Medigap plan at that time because when folks disenroll from their Advantage plan, they will lose the supplemental benefits they had. Your clients might find they save even more money by having a Medigap plan, particularly if they have had other high health care costs, i.e., medical equipment or out-of-network doctors.
It’s entirely possible they will have greater savings by changing their coverage compared to any increases in Medicare B premiums and surcharges.