Medicare Part B premium 2012 and the possible impact on your net Social Security benefit

As we get closer to 2012, you will read more about Medicare Part B premium increases. Some commentators will call a modest percentage increase a whopping increase based on the fact that for most Medicare beneficiaries there has been no increase in the premium since 2009. However, that does not mean costs have not increased as have the real premiums for Part B.

Consider this from Meducare.gov

Most beneficiaries will continue to pay the same $96.40 or $110.50 premium amount in 2011.  Beneficiaries who currently have the Social Security Administration (SSA) withhold their Part B premium and have incomes of $85,000 or less (or $170,000 or less for joint filers) will not have an increase in their Part B premium in 2011. 

For all others, the standard Medicare Part B monthly premium will be $115.40 in 2011, which is a 4.4% increase over the 2010 premium.  The Medicare Part B premium is increasing in 2011 due to possible increases in Part B costs.  If your income is above $85,000 (single) or $170,000 (married couple), then your Medicare Part B premium may be higher than $115.40 per month. 

Note that the real increase in 2011 was 4.4%, a modest increase by health care inflation standards. Let’s assume the 2012 increase is also 4.4% thus driving the standard Part B premium to $120.48. However, it is also expected that there will be Social Security COLA in 2012 meaning that the Part B premium will no longer be frozen at the 2009 level of $96.40. Therefore, a Medicare beneficiary who has benefited from a frozen Part B premium could see a jump in premium from $96.40 to $120.48 (estimated at this point) or a 24.9% increase. That increase covers the growth in costs for the four years from 2009 through 2012.

This is what happens when premiums are artificially held at levels that do not support growing costs. Medicare beneficiaries who were protected by the law because of no Social Security COLA may have benefited for the last three years, but 2012 will be the year to play catchup. It has nothing to do with Obamacare, but rather simple math and a Social Security law that ignores the unintended consequences of not allowing revenue (premiums) to keep up with expenses.

If you apply an estimated 2012 3.5% increase in your gross Social Security benefit and subtract a possible Part B premium increase of $24.08 (assuming you currently pay $96.40 for Part B), you will have a general idea of the impact of all this on your net Social Security payment. However, your Social Security payment will not go below what it is today in any case.