Medical costs are rising, which means that unlike the past four years, Medicare Part B premiums are set to increase as well. Most Social Security benefit recipients (with the exception of high earners) were able to avoid a Medicare premium increase in 2016 because there was no cost of living increase.
This is due to the “hold-harmless provision,” a law that prohibits a decrease in Social Security benefits based on Medicare premium increases. According to the Centers for Medicare and Medicaid Services, only about 30% of the 52 million Americans enrolled for 2016 were affected by the premium increase.
Unfortunately, 2017 will bring about a different situation. In October, the Social Security Administration announced that there will be a 0.3% COLA increase (1), thereby negating the “hold-harmless provision.”
Who Does This Affect?
Higher earners are more likely to feel the impact of the change. In 2016, most people paid $104.90 a month, unless their adjusted gross income on their 2014 tax return was above $85,000 for singles and married people filing separately or $170,000 for those filing a joint return.
In 2017, most recipients will see a minor increase in their Medicare premiums from $104.90 to about $109. However, premiums could change drastically for the following people:
- Those who enroll in Part B for the first time in 2017.
- Those who are not receiving Social Security benefits.
- Those who are directly billed for their Part B premiums.
- Those who have both Medicare and Medicaid, where Medicaid pays their premiums.
- Those who are subject to income-related monthly adjustments, because their modified adjusted gross income as reported on their IRS tax return from 2015 is above$85,000 for singles and married people filing separately or $170,000 for those filing a joint return.
How Much More Will I Pay?
For those affected, monthly premiums will increase by about 22%. The chart below (2) shows the exact premium amounts and increases. The Part B annual deductible is also increasing by $17 next year, from $166 to $183.
*2016 cost is based on 2014 IRS tax return and 2017 cost is based on 2015 IRS tax return.
When Does the Increase Go Into Effect?
The premium increase is for the year 2017 and began with January 2017 premiums. The official premium costs were announced on October 15th as Medicare open enrollment began.
What To Do Next
As always, it’s important to work with a qualified financial professional to evaluate how to make the most of your Social Security and Medicare benefits. If you have questions, or to learn more about whether or not you will be affected by the change, schedule a phone call now!
About Rocklin Senavinin, CFP®
With nearly 20 years of experience in the financial services industry, Roc has dedicated his career to helping individuals live comfortably in retirement and be able to enjoy the assets they have spent their career building. He is the founder of Fiduciary Wealth Management, a fee-only registered investment advisory firm in Little Rock, Arkansas. As a CERTIFIED FINANCIAL PLANNER™ professional, he has advanced training in the holistic process of creating a personal financial plan that addresses a person’s comprehensive needs for the short and long-term. Having built a successful career, he was named one of Arkansas Business’ 40 Under 40 in 2014, which honors intriguing business and political leaders under 40 years old. To learn more, connect with Roc on LinkedIn or visit www.fidwm.com. If you have questions, feel free to schedule a phone call using this link!