You may already be aware of this, but just in case you aren’t, right or wrong not everyone pays the same amount for their Medicare Part B premiums. As a result, while most individuals enrolled in Medicare will see a small increase in their premiums in 2017, others will see a more sizeable increase.
Each year, the Centers for Medicare & Medicaid Services (CMS) set the following year’s Part B base premium. In 2017, the Part B base monthly premium will be $134, which is a 10% increase over 2016. But not everyone will pay this amount.
So who will be paying what?
Existing Social Security Beneficiaries
As a result of the “Hold-Harmless” provision most Medicare Enrollees (70 %) who are also collecting Social Security benefits, and not considered “High-Income Retirees” as defined below, will only see a small premium increase. For these Medicare beneficiaries the average Part B monthly premium is going from $104.90 in 2016 to $109 in 2017.
What is the “Hold Harmless” provision?
Under this provision, the dollar amount increase of Medicare Part B premiums, for those already receiving benefits, can never be greater than any potential Social Security Cost-of-living adjustment (COLA). The provision is meant to ensure that your net monthly benefits (after the deduction of your Part B Premium) never decreases.
Because the COLA for 2017 is only 0.3%, (it was 0.0% in 2016) it is not large enough to cover the full amount of the increased premium. As a result, those protected by the hold harmless provision will not see their premium increase to the full $134 level.
Not so Fun Fact:
Premiums for the remaining 30 percent of Medicare beneficiaries who are not covered by the hold harmless provision must cover most of the increase in Medicare costs for 2017 for all beneficiaries
Here is the other 30% and who will pay what:
New Medicare Enrollees
Retirees who sign up for Medicare in 2017 will pay the full amount of the standard Medicare Part B monthly premium of $134, which is 10 percent higher than the 2016 rate of $121.80. Meaning these new enrollees will pay $300 more this year for Medicare Part B than existing Social Security recipients.
High-Income retirees, representing approximately 5% of Medicare beneficiaries, are defined as those beneficiaries who file an individual tax return and earn more than $85,000, or those filing a Joint Tax Return who earn more than $170,000, per year. In 2017, their Medicare Part B Premiums will range from $187.50 per month to $428.60 per month for those earning over $214,000 ($428,000 for Joint Filers).
Medicare Beneficiaries who are delaying receiving Social Security Benefits
Although Medicare Eligibility is age 65, the Social Security Full Retirement Age for most baby boomers is now age 66 and rising. As a result, for those filing for Medicare when eligible, but who delay filing for Social Security benefits until a later date to maximize their monthly benefits, will be responsible for paying the standard monthly Medicare Part B premium of $134 in 2017.
A quick word on when you might expect your next “real” raise in your Social Security benefits.
Now that you have a better understanding of how Social Security COLAs and Medicare premium increases work, you may be wondering when you might expect a raise in your social security benefits that doesn’t just go back to paying increases in your Medicare premium. You’re not alone.
Things might be looking up for a 2018 COLA that finally ends up in your pocket. With a potentially strengthening economy in 2017 and a corresponding increase in the Bureau of Labor Statistics (BLS) Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), (sounds exciting doesn’t it…) which is what Social Security Cost-of-living adjustments are based, things are looking more promising.
Sources: Centers for Medicare & Medicaid Services. CMS.gov
Social Security Office of Retirement and Disability Policy. Social Security Cost-of-Living Adjustments and the Consumer Price Index. Social Security Bulletin, Vol 67, No. 3, 2007
Steven C. Johnson, ChFCa financial planner with Finivi, has helped many clients over the past 27 years maximize their social security retirement income benefits. Steve is a well sought out speaker for numerous private and public corporations, educational institutions, and social and fraternal organizations on the topics of Social Security and Retirement Income Planning. Do you need help with your retirement planning and/or maximizing your Social Security retirement income? You can call (800)530-6635 for a complimentary consultation or click here to schedule online.