Most Medicare beneficiaries will not see an increase in their Part B premium for 2011. It’s not that Medicare costs are being controlled. In fact, new benefits effective in 2011 are adding to the cost of Medicare beyond the normal growth in costs.
The fact is that the law does not allow an increase in premiums for most existing beneficiaries in years when there is no increase in the Social Security monthly benefit because of low inflation and the COLA provision in Social Security is not being triggered.
While this may seem like good news, in the long run it is not. What it means is that at some point there will be a lot of catching up to do. If costs continue to go up and the portion of those costs paid by beneficiaries does not, who pays them? Either they are absorbed by the Federal government or eventually they are built into future premium increases for Medicare beneficiaries. In fact, when there is a COLA, perhaps in 2012 the real premiums (reflecting three years of increases) will be spread across all Medicare beneficiaries. In the meantime, the higher costs are absorbed by the 25% on Medicare who do not receive this exemption.
There are two groups of Medicare beneficiaries who are not exempt from the COLA protection. The first group is very low-income people on Medicaid. In that case, the real premium increase in Part B is picked up by the state providing the Medicaid…otherwise known as cost shifting to taxpayers in the states. The second group is the folks we have all come to despise along with insurance companies, the folks who make the big bucks. In this case it is Medicare beneficiaries with incomes over $85,000 and couples with an income over $170,000. These folks get to pay an additional premium for Medicare Part B and are not exempt from the COLA limitation. These beneficiaries who are required to make supplemental payments to the standard Part B premium are likely to see a significant increase for 2011, perhaps 20% or more.
Individuals who first start to receive Social Security in 2011 are also not exempt from the premium increase and will pay the actual premium reflecting Medicare costs for Part B.