If you have a Medicare question you’d like answered, email it to AskRoger@SeniorMarketSales.com.
This week’s question deals with all the rumors floating around about changes to Medicare and Medicare Supplement due to the Affordable Care Act, specifically dramatic increases to the Part B Premium.
I had a client forward me an email stating that the proposed Part B premium for 2013 is $120.40 and in 2012 $247.00. Is this correct? What is your opinion of whether it really will be raised that much? Any other changes (for Medicare supp) proposed in 2014 that you could summarize?
I did some further correspondence with Catherine to see where the email came from.
There are a lot of things about Medicare floating around these days and not all are true.
In fact, this question was also asked on a recent AARP blog post. Here’s how they responded:
Q. I just received an email saying that under "Obamacare" our Medicare Part B premiums will rise to $247 a month by 2014. Is this true?
A. No, it isn't true. A mass email making this claim has been circulating since before the 2010 elections. But it's just another attempt to scare older Americans and has no basis in fact.
I thought this would be an excellent opportunity to explain how that Part B premium is derived each year.
The official formula for determining Part B premiums was established by Congress decades ago. The standard premium amount for each year is always calculated on the level of Medicare health care costs in the previous year — and reflects the fact that the government pays 75 percent of Part B costs and beneficiaries pay 25 percent.
This process is in no way affected by the new health care law, officially known as the Affordable Care Act. The law does, however, contain provisions to reduce the rate of Medicare costs over time (without reducing guaranteed benefits), and if this plays out as planned, it could hold Part B premiums down or possibly even lower them.
The standard Part B premium for 2012, announced in October 2011, will be $99.90 a month. But there is no way of accurately predicting what it will be in 2013, 2014 or any future years.
Another much older law did affect Part B premiums in 2010 and 2011 in an unprecedented way. That law prohibits a premium increase in any year when there is no Social Security cost-of-living adjustment (COLA). So in the past two years when — for the first time in more than 30 years — there was no COLA, most people's premiums were frozen at the 2009 level, $96.40 a month.
Those who were new to Medicare, and those who paid higher premiums because their incomes were above a certain level. These people bore the brunt of rising Medicare costs. Therefore, their standard Part B premiums were $110.50 a month in 2010 and $115.40 in 2011 (or more if they paid the higher-income surcharge) — whereas everybody else still paid $96.40. However, there will be a Social Security COLA in 2012 and this changes the situation. The standard 2012 Medicare Part B premium will once again be a single dollar amount — $99.90 a month. For people who’ve been paying $96.40 for the past three years, this means an increase of $3.50 a month. But for those who have been paying $110.50 or $115.40, the new premium is a lot lower — dropping by $10.60 and $15.50 a month respectively. With means testing the less than 1 our of 20 that pay a higher premium due to income. For details of these surcharges, see the Social Security publication "Rules for Higher-Income Beneficiaries."