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Social Security News

Part B: Expensive Part of Medicare May Squash COLA for Seniors

Announcement due this week - what will it mean to you?

Oct. 24, 2011 - Millions of senior wait for the other shoe to drop…the one they may squash their 2012 increase from Social Security. This year, for the first time in two years, senior citizens and others depending on Social Security will receive a cost-of-living increase for 2012. The other shoe, however, is the cost of Medicare Part B for 2012, which could wipe out the COLA gain.

Most seniors play a monthly premium – actually a reduction in their Social Security payment - for Medicare Part B medical insurance. This part of Medicare helps pay for doctor’s services and outpatient care. It also pays for some of the medical services not covered by Medicare Part A. Examples are payments for physical and occupational therapists, as well as some home health care.

By statute, Part B premiums must cover 25% of projected Part B costs for beneficiaries.

This year Social Security has announced a 3.6% increase for 2012, which is based in the rate of inflation for the past year. The amount will be about $43 per month for the average SS recipient.

The problem is a potential increase in the cost of Part B for 2012, which is expected to be announced by Medicare this week. It could be larger than the increase in SS for the average senior next year.

 

Archived Stories

 
 

Social Security COLA Increase of 3.6 Percent for Senior Citizens in 2012

Cost-of-Living Adjustment is First Since 2009; see details, questions answered by Social Security - Oct. 19, 2011

Social Security Trustees Project Trust Fund Exhaustion One Year Sooner

Senior citizen advocacy groups not alarmed by 2036 deadline, see time for fix - May 15, 2011

Why Social Security Isn't a Problem for 26 Years, and the Best Way to Fix It Permanently

Social Security isn't responsible for federal deficit - just the opposite. Until last year it took in more than it paid out. It lent the surpluses to the government

By Robert Reich, former Secretary of Labor - Feb. 26, 2011

Nearly Half of Senior Citizens Receiving Smaller Social Security Checks in 2011

New survey finds lack of COLA hurting seniors as over 60% see their expenses rise, Medicare premiums reduce checks  - Feb. 3, 2011

Republicans Block $250 for Senior Citizens to Replace Lack of Social Security Hike in 2011

Also other action reduces income to Social Security Trust Fund by $120 billion - Dec. 9, 2010

Now Official Senior Citizens Will Not Get COLA Increase for 2011; $250 Check, Maybe

Medicare law has “hold harmless” provision protecting 70% on Social Security from paying a higher Part B premium, which could cause many to receive less than 2010 - Oct. 15, 2010


Read more Social Security News

also check Medicare and Senior Politics

 

Although seniors did not receive a COLA increase last year, they also did not receive an increase in their Part B payment. This is due to a provision in the law that protects seniors from ever seeing their SS payment shrink. When there is no increase in income, there can be no increase in expense.

The last COLA increase took effect in January 2009 and was 5.8% for all of 2009. Over the past five years, however, Medicare Part B program costs have increased an average of 8.3% per year and are expected to continue to grow. The Medicare Part B premium was $78.20 per month in 2005 and $96.40 in 2011. In some cases, this amount may be higher if the beneficiary didn’t sign up for Part B when they first became eligible or must pay higher rates based on income.

“Under current law, the only way to collect the 25% of Part B costs that are required to be covered by beneficiary premiums is to increase Part B premiums on beneficiaries who are not protected by the hold harmless provision,” according to a recent study by the Congressional Research Service.

“The one-quarter of beneficiaries who are not held harmless therefore shoulder the entire beneficiary share of the increase in Part B costs. In other words, their collective premium increase can be nearly four times greater than if there were no hold harmless provision,” says the report titled, Interactions Between the Social Security COLA and Medicare Part B Premiums.

“The one-quarter of Part B enrollees to whom the hold harmless provision does not apply can be divided into three groups:

   ● (1) low-income beneficiaries whose Part B premiums are not withheld from their Social Security benefits but instead are fully paid by the Medicaid program (currently about 17.5% of Part B enrollees, expected to increase);

   ● (2) high-income beneficiaries who are subject to income-related Part B premiums (about 5% of Part B enrollees); and

   ● (3) beneficiaries for whom there is insufficient history of Social Security payments with corresponding deductions for the Part B premium (about 5% of Part B enrollees), which would include both new enrollees to either Social Security or Medicare and Part B enrollees who do not participate in Social Security.

“The substantial majority of Part B enrollees (17.5%) not held harmless in 2010 were low-income beneficiaries whose Part B premiums are paid by Medicaid. As a result, in the absence of any intervention by Congress, most of the cost of the increase in Part B premiums in 2010 and 2011 will be paid by the federal-state Medicaid program, not directly by beneficiaries.”

>> For more analysis - Interactions Between the Social Security COLA and Medicare Part B Premiums, Congressional Research Service

>> Additional information about the Medicare premiums, deductibles, and coinsurance rates for 2011 is available in the November 4, 2010 Medicare Fact Sheet titled, "Medicare Premiums, Deductibles for 2011" on the www.cms.gov website.

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