For 2016 Congress and the White House put a temporary fix on rising Part B premiums.
Instead of letting the premium rise to the appropriate level, the increase was limited and “paid for” by adding a $3.00 surcharge to the premium of individuals not covered by the hold harmless provision in Social Security that prevents a premium increase from lowering the Social Security benefit for most beneficiaries.
The agreement between Congress and the White House limits such maneuvers to 2017 premiums. Keep that in mind.
Sooner or later the correct premium needed to pay for Part B must be paid by all Medicare beneficiaries.
Sooner or later, most if not all, of near term future COLA increases will be eaten up by premiums that were not collected. The longer this charade continues the worse it will be for beneficiaries.
Let’s say the correct 2016 Medicare Part B premium is $121.80 which includes the $3.00 surcharge and let’s say the cost of Part B increases as projected by the Trustees and the premium rises to $123.70 (including the surcharge). That means that the typical retiree who is protected by the hold harmless provision could pay $123.70 rather than the current $104.90 assuming there is a COLA to cover that. The Social Security Trustees predict a COLA of 3.1% for 2017.
However, to date based on inflation trends a COLA is not going to happen. If there is no COLA or a very small COLA, the same premium fudging process used in 2016 may be followed again for 2017 (especially in an election year) thereby creating an even wider gap between the actual actuarial premium and what most beneficiaries pay.
Sooner or later this house of cards will come crashing down … on Medicare beneficiaries (or taxpayers).
According to CMS, this change in the calculation of the Part B premium for 2016 will cost $7.4 billion in federal outlays because there will be a shortfall in beneficiary premium payments in 2016.12 CMS also estimated that states will save a total of $1.8 billion on premium payments for dually-eligible beneficiaries due to the actual premium for 2016 being lower than what was initially projected.
The law calls for a transfer of funds from general revenues to the SMI trust fund to temporarily cover the $7.4 billion cost, but also requires Part B enrollees to repay this amount over time in the form of a modest premium surcharge. Beginning in 2016, a $3 repayment surcharge will be added to the monthly premium payment for the 30 percent of beneficiaries who are not protected by the hold-harmless provision; beneficiaries who pay income-related premiums will pay somewhat higher repayment amounts.
In 2017 and later years until the total cost is repaid, the repayment surcharge will be added to the monthly Part B premium amount paid by all Part B enrollees who are not protected by the hold-harmless provision. For those years where there is a Social Security cost-of-living increase, the vast majority of Part B enrollees will not be protected by the hold-harmless provision and will be required to pay these repayment amounts. SOURCE: Kaiser Family Foundation KFF.org