If Congress doesn’t act soon, a provision meant to protect Social Security recipients from reductions in benefits due to increases in Medicare premiums will result in huge hikes for about one-third of beneficiaries.
How huge? Medicare trustees estimate those beneficiaries not protected by Social Security’s “hold harmless” provision will get hit with a 52 percent increase, raising standard premiums from $104.90 a month to $159.30 a month. Higher-income recipients would see even steeper increases.
Inflation is the culprit. Specifically, the nation’s extraordinarily low inflation rate. Plummeting gas prices and steady prices for other goods mean Social Security recipients won’t get a cost of living increase this year. That, in turn, means Medicare can’t increase charges to about 70 percent of beneficiaries who have their Part B premiums deducted from their Social Security payments.
That leaves the other 30 percent of Medicare beneficiaries holding the bag if nothing is done.
The Part B premium is supposed to cover about a quarter of Medicare’s projected physician and outpatient costs. The premium has held steady for the last three years, but needs to rise this year.
Spread across all Medicare recipients, the increase wouldn’t be traumatic. But when fewer than a third must shoulder the entire burden, the lack of fairness is palpable.
About 3 million of those likely to be hit by the higher premiums already pay more than most. Individuals with incomes greater than $85,000 ($170,000 for couples) pay more than the standard premium. Higher earners could see their monthly premium go as high as $510.
A million or so more people who receive Medicare but have either deferred receiving Social Security or aren’t yet eligible would also be hit with the higher premiums, as would another 2.8 million individuals who are new to Medicare in 2016.
This could hit state Medicaid budgets as well because some state programs pay Medicare Part B premiums for low-income recipients.
There are a number of creative ways for Congress to address this problem, but they would all cost money — up to $7 billion, according to estimates — and would require bipartisan cooperation.
Asking the current dysfunctional Congress to act creatively and cooperatively, and to spend more money while they’re at it, is a tall order. But given that the alternative is to seriously tick off — in an election year no less — a demographic known for both its ability to hold a grudge and its tendency to vote, perhaps the will can be found.
The system is designed so that premiums of protected beneficiaries will “normalize” in future years, when they presumably will see cost-of-living increases in their Social Security checks.
Eventually, then, those paying more now would wind up paying the same as those who have their payments deducted from Social Security. But that equalization could take years, and the fundamental unfairness of the system remains.
Meanwhile, the Obama administration is examining its own options to fix the problem, but they seem limited to dipping into the Medicare contingency fund, which would be unwise. It already has less money than it should for genuine emergencies, not ones that emerge from congressional failure.
It won’t help this year, but one potential solution would be to change the way Social Security’s cost of living adjustments are calculated. Advocates have long argued that the current system, based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, doesn’t accurately reflect the type of spending on goods and services that seniors engage in.
A more accurate cost of living adjustment could help the government avoid this problem in the future. But for now, time is running out for Congress and the White House to find a solution. Trustees will set Part B premiums this month.
St. Louis Post-Dispatch