On the heels of the announcement of a 3.6 percent increase in Social Security benefits in 2012 comes news that Medicare’s monthly premium will be much lower than expected next year — and will actually drop for millions of beneficiaries. Administration officials said the new health reform law was partially responsible for keeping costs down.
The basic premium for Medicare Part B will be $99.90 a month, only a $3.50 increase over the $96.40 a month that most beneficiaries have been paying since 2008. This increase is $7 a month less than what was being projected as recently as last May and means that most seniors will be able to keep the lion’s share of their Social Security benefit increase. In addition, higher-income earners and others who have not benefited from the recent premium freeze will see a significant drop in their premiums.
Most Medicare recipients have not experienced a rise in their Medicare Part B premium — which pays for doctor visits and other outpatient costs — because of a provision in the Medicare law prohibiting premiums from climbing more than that year’s cost-of-living increase in Social Security benefits. Since there has been no Social Security increase in the last couple of years, most beneficiaries – nearly three-quarters – have continued to pay Part B premiums of $96.40 per month.
But this protection has not applied to the other one-quarter of beneficiaries who either:
- do not have their Part B premiums withheld from their Social Security checks, or
- pay a higher Part B premium surcharge based on high income (see below), or
- are newly enrolled in Part B.
These beneficiaries who did not benefit from the premium freeze will see their premiums reduced from $115.40 a month to the new $99.90 premium. In addition, the Part B deductible will fall $22 to $140.
Donald Berwick, MD, administrator of the federal Centers for Medicare and Medicaid Services, said one big reason for the lower-than-expected premium hike was historically low rates of health care utilization, which he attributed in part to the health reform law’s focus on preventive services. In addition, the unexpected Social Security benefit increase meant that rising Medicare costs could be spread among many more beneficiaries, with each one paying a smaller share.
“Between reduced Part B premiums and increased Social Security payments, the average Social Security recipient will have a net cost-of-living increase of $40 per month in 2012,” said the Center Medicare Advocacy.
Some might believe that politics played a role in keeping Medicare’s premiums down during an election year, but that’s not so, said Tricia Neuman of the non-partisan Kaiser Family Foundation. “Changes in premiums are obviously important to seniors but the numbers are based on what the law requires, and determined by independent actuaries, rather than politics,” Neuman said.
Following are all the new Medicare figures for 2012:
- Basic Part B premium: $99.90/month
- Part B deductible: $140 (was $162)
- Part A deductible: $1,156 (was $1,132)
- Co-payment for hospital stay days 61-90: $289/day (was $283)
- Co-payment for hospital stay days 91 and beyond: $578/day (was $566)
- Skilled nursing facility co-payment, days 21-100: $144.50/day (was $141.50)
As directed by the 2003 Medicare law, higher-income beneficiaries will pay higher Part B premiums. Following are those amounts for 2012:
- Individuals with annual incomes between $85,000 and $107,000 and married couples with annual incomes between $170,000 and $214,000 will pay a monthly premium of $139.90 (was $161.50).
- Individuals with annual incomes between $107,000 and $160,000 and married couples with annual incomes between $214,000 and $320,000 will pay a monthly premium of $199.80 (was $230.70).
- Individuals with annual incomes between $160,000 and $214,000 and married couples with annual incomes between $320,000 and $428,000 will pay a monthly premium of $259.70 (was $299.90).
- Individuals with annual incomes of $214,000 or more and married couples with annual incomes of $428,000 or more will pay a monthly premium of $319.70 (was $369.10).
Rates differ for beneficiaries who are married but file a separate tax return from their spouse:
- Those with incomes between $85,000 and $129,000 will pay a monthly premium of $259.70 (was $299.90).
- Those with incomes greater than $129,000 will pay a monthly premium of $319.70 (was $369.10).
The Social Security Administration uses the income reported two years ago to determine a Part B beneficiary’s premiums. So the income reported on a beneficiary’s 2010 tax return is used to determine whether the beneficiary must pay a higher monthly Part B premium in 2012. Income is calculated by taking a beneficiary’s adjusted gross income and adding back in some normally excluded income, such as tax-exempt interest,U.S.savings bond interest used to pay tuition, and certain income from foreign sources. This is called modified adjusted gross income (MAGI). If a beneficiary’s MAGI decreased significantly in the past two years, she may request that information from more recent years be used to calculate the premium.
Those who enroll in Medicare Advantage plans may have different cost-sharing arrangements. On average Medicare Advantage premiums will be 4 percent lower in 2012 than in 2011.
For Medicare’s Fact Sheet on the new numbers, which includes the new Medicare Part D premium adjustments for high earners, click here.
For more about Medicare coverage, click here.
To discuss Medicare coverage or other elder law issues with an attorney, please email the Elder Law Center or call 630-844-0065. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.