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.
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.”
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