By now if you’re a Medicare recipient I’m sure you’ve heard all about the potential 52% Medicare Premium increase coming in 2016 for some recipients. This is due to a virtually-unknown (until recently) part of the law that allows no increase to Medicare premiums if there is no COLA adjustment to Social Security benefits being currently received. This happened in 2010 and 2011 when there was no COLA added for Social Security recipients – it just wasn’t the headline grabbing 52% number.
As a result of this lack of increase for 70% of all Medicare Part B recipients, all other Medicare Part B premium payers must pick up the slack. The increase to premium is projected to be a maximum of 52% – from $104.90 to $159.40.
Who is impacted?
Primarily only those people who are over age 65, receiving Part B Medicare coverage and who are not currently receiving Social Security benefits will be impacted. Anyone who is currently receiving Social Security and having the Part B premium deducted from their check will have the same premium for 2016 as they have in 2015, since there is no COLA projected. (Note: If you’re receiving Social Security and NOT having the Part B premium deducted from your check, you’re also going to be impacted – you should change this right away to avoid the unnecessary increase!)
Many people have delayed receipt of Social Security benefits past age 65 in order to maximize the Social Security benefits that they’ll eventually receive. Delaying from age 65 to age 66 will result in an increase of benefits by 7.14% for most recipients. Delaying beyond age 66 will result in an increase to benefits of 8% for each year of delay.
Dave is reaching age 65 right now, but has always intended to delay his Social Security benefit to at least age 66. The decision of whether to start taking benefits now (to avoid the 52% premium increase!) versus delaying becomes a matter of running the numbers.
This $54.50 increase is made up completely if Dave’s benefit would have been $763.30 per month or more at age 65. For any higher benefit, the result is that much better.
For another example, Greta, who is reaching age 70 late next year and has not started receiving Social Security would only consider filing for benefits now if her age 66 benefit (the benefit against which the delay increases are calculated) would have been less than $681.25. If Greta’s age 66 benefit was, for example, $700 per month, delaying for another year to her age 70 would result in an additional increase of $56 per month – more than the Medicare increase.
Lastly, if you’re nearing (within a few months) of a milestone that you intended to file for benefits –such as if you intended to file in January – you might consider filing early now if it’s that important to you. In the long run the delay of a few months would not have a large impact (three months would be an increase of 2%) and if it helps you to sleep at night then all the better. I’d still counsel that the 2% extra is worth enduring the increase to the Medicare Premium though – especially if you’ve delayed this long in order to maximize benefits for yourself and perhaps for a younger spouse’s future survivor benefits.
Effect Is Temporary
The last thing to keep in mind with all of this is that the effect of this Medicare Part B premium increase are temporary. After COLAs are again added to Social Security benefits, the Medicare premiums will even out again. That’s how it happened after the non-increases of 2010 and 2011: in 2010 for some folks the Medicare premium increased from $96.40 to $110.50, and in 2011 for some folks it increased again to $115.40 (19.71% in all!). In 2012, when COLAs were once again included for Social Security benefits, everyone’s Medicare Part B premium fell back to $99.90 a month (except for the folks in higher tax brackets, which is an entirely separate set of numbers to consider).
Now is the time to act though – because to avoid the increase your benefit must have started in November or earlier. Start in December and you’ll get the premium increase anyway.
Sterling Raskie, MSFS, CFP®, ChFC®
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Thanks for a great article. I am 67 and have been receiving SS for the past year but not Medicare part B (covered by employer). I was planning to start part B in January, but I believe this will subject me to the increase. If I start part B in December will I get the lower rate for 2016? Thanks!
You will need to be receiving Medicare for both November and December in order to avoid the increase.
jb
Great post about Medicare and Social Security benefits! I definitely found it informative. Those examples make it a lot easier to explain medicare premium adjustments to clients and friends, and I can just link them here, so thanks for that. I also found a good post about the government talking about cutting benefits again this year as well. What a year!
Check it out here–
Social Security Disability Benefits May Be Cut by Nearly 20%
Is this really the bottom line: “In 2012, when COLAs were once again included for Social Security benefits, everyone’s Medicare Part B premium fell back to $99.90 a month”. I am 66 and pay $104 for Medicare because I’m waiting until 70 for my SS benefits. I won’t lose any sleep over this 52% increase if the Part B premium goes back to “normal”, i.e. the same, for everyone in 2017 or 2018. Why don’t they talk more about that?
I don’t know – I guess it doesn’t make for good headlines.
jb
Thanks for your article Jim! Somehow I had missed reading about this increase before. My husband will be full retirement age in November. He is already on Medicare which he pays quarterly. He was planning to file and suspend SS benefits until 70. In light of the huge Medicare increase would it make sense for him to begin receiving SS now and then suspend after a few months as suggested by this article in Kiplingers?
“But if you are at least full retirement age, you could apply for benefits in 2015 and make sure your Medicare premiums are withheld from your Social Security payments, then suspend Social Security benefits after you qualify for the hold-harmless provision, Steffen says. After you suspend the benefits, you start to earn an 8% delayed retirement credit for every year you wait before claiming Social Security benefits between full retirement age and age 70. You would lose a portion of the delayed retirement credit for the months you were receiving your Social Security payment.”
Lastly when will we find out if the 59% increase is a done deal?
I don’t know of a reason why this wouldn’t work. I didn’t include this option in my explanation because I think it’s akin to gaming the system, but there’s nothing about it that I know of that is outside the rules.
jb
Thanks Jim. And again is the 52% increase a done deal or in your opinion are efforts for relief in Congress a strong possibility?
There’s a high probability that the end result increase will be something a bit less than the projected 52% increase. But it’s our federal government, so who knows what may happen?
jb