There Are No Surprise Increases Around The Corner For Medicare Insurance Premiums, But What Does The Future Hold?
With an aging population, controversial healthcare reform and a contentious election, Medicare insurance premiums are in the public consciousness. Medicare has 48 million beneficiaries and that number will almost double as the baby-boomers retire.
When Medicare was created in 1966, premiums were set to 50% of costs, but a 1972 congressional limit on premiums gradually eroded the percentage that premiums contributed to Medicare revenue. Eventually after 30 years of congressional tweaking, the Balanced Budget Act of 1997 permanently set the Part B premium to 25% of costs.
Medicare benefits are based on the Center for Medicare & Medicaid’s (CMS) projections, but increases are subject to cost of living adjustments (COLA) set by the Social Security Administration (SSA). As the SSA did not adjust the COLA for the years 2009 and 2010, most beneficiaries saw no increase in their premiums even though the standard premium increased in 2009 and 2010.
In 2007 a new surcharge was applied to beneficiaries with a modified adjusted gross income of above $85,000 for singles or $170,000 for married couples. This level was set to reflect the top 5% of earners, however the Affordable Care Act (ACA) has frozen those levels so in the years to come a higher percentage of Americans will pay the high-income surcharge.
A COLA increase in 2012 allowed CMS to close the gap between the standard premium and the amount that most beneficiaries pay. Crediting the ACA, CMS lowered the standard premium to $99.90 from a previously forecasted $106.60. Although the standard premium was lowered, the amount most beneficiaries paid increased by $3.50, and some beneficiaries who previously paid the high-income surcharge saw a decrease in their Medicare insurance premium.
Although there is broad agreement that Medicare is fiscally unsound, there is no agreement on how to fix this popular government program. As the most visible portion of Medicare revenue, Medicare insurance premiums might be immune to drastic hikes; however deductible increases and coverage decreases could be equally painful to the wallet. Future beneficiaries will have to pay more, the question is not if, but rather how and when.