LETTER I RECIEVED TODAY FROM SEN. DAN COATS ON MEDICARE PART B PREMIUM SPIKE
Thank you for contacting me regarding premium increases in 2016 for Medicare Part B and the Cost of Living Adjustment (COLA) for Social Security beneficiaries. I appreciate the opportunity to respond.
Medicare is the federal health insurance program for most individuals who are sixty-five and older and for certain disabled persons. Medicare Part B provides coverage for physicians’ services, outpatient services, durable medical equipment, and other services. Part B is financed through a combination of beneficiary premiums and federal revenue.
Many Medicare Part B beneficiaries also receive Social Security benefits. Contrary to popular belief, Congress does not determine annual Social Security COLAs. Social Security COLAs are determined by an economic formula that measures the increase or decrease in the price of goods in the American economy. This formula, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), is the sole determining factor of a COLA for Social Security recipients. In 2015, Social Security beneficiaries received a 1.7 percent COLA. However, in 2016 there will be no COLA because the CPI-W decreased.
By law, Medicare Part B premiums, which are deducted automatically from Social Security checks for those who receive Social Security, must cover 25 percent of the projected annual Part B costs. The Social Security Act (SSA) includes a “hold harmless” provision that prevents premium increases should the amount be higher than their Social Security monthly benefit. While this hold harmless provision will prevent Part B increases for about 70 percent of beneficiaries, 30 percent of beneficiaries who are not covered by it must pay the portion that otherwise would have been spread across all beneficiaries.
Each year, the Centers for Medicare and Medicaid Services (CMS) determines the Medicare Part B premiums for the following year. Reports that some beneficiaries will face a steep 2016 premium increase are based on a July 2015 Medicare Trustees report. The Trustees documented an unexpected increase in Part B spending that they estimate would cause premiums to rise. Since there will be no Social Security COLA increase in 2016, the Trustees estimated that the projected standard Medicare Part B premium is expected to increase from $104.90 to $159.30 in 2016 for those not protected under the hold harmless provision. Individuals not protected and thus subject to the increase are: those covered under both Medicare and Medicaid (“dual eligibles”); high income earners already subject to higher premiums; new beneficiaries; and those not collecting Social Security benefits. The law does provide CMS with some discretion in setting premiums, though CMS has not officially announced the 2016 premium amount at this time.
I understand that steep increases in Part B premiums will place a significant burden on those Hoosiers who are not protected by the hold harmless provision. As a member of the Senate Finance Committee, I am closely monitoring the actions of CMS and I am actively engaged in examining responsible options to fix this imminent problem and to address long-term solutions to preserve benefits for current and future beneficiaries.
Thank you again for contacting me, and please do not hesitate to keep in touch on other matters of concern to you.
United States Senator
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