Medicare Part B premiums are getting set to make one of the biggest jumps in 14 years, according to new analysis from The Senior Citizens League (TSCL).
While the Social Security cost-of-living adjustment (COLA) will increase benefits by 1.6% in 2020, Medicare Part B premiums are climbing by 6.7%, “more than four times faster than the COLA,” says Medicare and Social Security policy analyst Mary Johnson.
The standard monthly Medicare Part B premium, which covers doctors and outpatient services, will increase by $9.10 from $135.50 in 2019, to $144.60 in 2020. At the same time, the COLA will increase an average Social Security benefit of $1,460 by only $23.40. After deduction for the Part B premium, that would leave just $14.30 per month for someone with average benefits to cover all other rising costs, including other rising Medicare premiums for prescription drugs or supplemental coverage.
“The 6.7% increase in the Part B premium is the largest since 2006 for a year in which a COLA is payable,” Johnson says. There have been bigger jumps in Part B premiums as recently as 2016 and 2017, but those were two years in which there was no or almost no COLA paid. This situation can cause unusually high Part B premium spikes.
In 2016 the COLA was zero and Part B premiums rose by 16.1%. In 2017 the COLA was just 0.3 percentage point, and Part B premiums rose by 10%. “Those premium spikes were due in large part to the cost-shifting effect created when no COLA was payable,” Johnson notes.
When there is no or a very low COLA, a special provision of law known as “hold harmless” protects beneficiaries when the dollar amount of their COLA is lower than the dollar amount of their Part B increase. The Part B premium is adjusted to prevent a reduction in Social Security benefits from one year to the next. “But when this provision occurs on a program-wide basis—as it did in 2016 and 2017, the entire increase in Medicare Part B for the year is shifted to the people who are not protected by hold harmless, Johnson notes.
Instead of the Part B increase being spread over all Medicare beneficiaries, the total cost increase is borne by only 30% of Medicare beneficiaries who are not protected by the hold harmless provisions. They include:
- people who are still working and pay Medicare Part B by check
- low-income Medicare beneficiaries whose Part B is paid for by state Medicaid programs, and
- beneficiaries with incomes in 2019 are $85,000 (single) $170,000 (couple) or more and who pay an income-related surcharge.
Because Medicare Part B premiums are automatically deducted from Social Security benefits, retirees find it difficult to fully anticipate the squeeze that rising Medicare Part B (and other Medicare premiums) can put on benefits and their budgets. In the past 15 years the percentage of the Social Security COLA increase has been lower than Medicare Part B premium increase 9 times.
All beneficiaries get a notification letter from the Social Security Administration explaining the amount of their benefits and the amount that will be deducted for Part B and any other deductions. “Those with the lowest benefits—less than $570 per month in 2020—are at risk of seeing their Medicare Part B premium consume their entire COLA,” Johnson notes.
Medicare costs take a significant portion of retirees’ Social Security benefits. A survey conducted by The Senior Citizens League found that more than 51% of survey participants report spending at least $376 per month on total healthcare costs (including premiums and out-of-pocket costs) and more than one in five spend $1,000 or more per month.
To learn more, visit http://www.SeniorsLeague.org.