Budget Bill Prevents ‘Dramatic’ Medicare Premium Hike

Last week, we learned that low inflation over the past year would mean no cost-of-living adjustment for Social Security beneficiaries in 2016, while higher-income Medicare Part B beneficiaries would see a sharp rise in their monthly premiums. However, if the bipartisan budget bill is passed by Congress as it currently stands, those higher-income Medicare recipients would see only a slight increase in their premiums, to $120. Lower-income recipients who are held harmless from premium raises because of their income levels would continue to pay $104.90 a month.

Under Title VI – Health Care, section 601 of the bill, a “discussion draft” of which was released by House Republicans Monday night, the bill would “prevent a dramatic premium increase on beneficiaries not held harmless” under previous law. The “held-harmless” phrase refers to the income thresholds that determine premiums for Part B of Medicare; about 30% of Medicare beneficiaries have incomes above the $85,000 (for single filers) modified AGI or $170,000 (for joint filers) MAGI level who under current law would pay premiums between $223.00 to $509.80 per month in 2016.

The budget bill sets the premium level for higher-income recipients in 2016 by arguing that $120 is the premium that would otherwise be paid by all beneficiaries in 2016 “if the hold harmless provision in current law did not apply.”

Since current law requires that premiums for all beneficiaries must pay for 25% of Medicare Part B’s cost, when there is no COLA, the higher-income group must pay the full 25% themselves.

The bill’s language says that revenue shortfall would be made up via “a loan of general revenue from the Federal Treasury to the Supplemental Medical Insurance (SMI) Trust Fund” next year. The loan would be repaid by those beneficiaries not held harmless via “an additional $3” premium surcharge beginning in 2016 that would be imposed until the loan was paid back. However, the draft bill’s current language also says that “Medicare beneficiaries who currently pay higher income-related premiums would pay higher than $3, the amount of which would increase for beneficiaries in each higher-income bracket in proportion to income-related premiums under current law.”