The last couple of weeks have brought unexpected and unwelcome news to millions of seniors and disabled people on Medicare. Their already high out-of-pocket costs are going to get higher.
For some, premiums for Medicare Part B coverage that pays for doctor and outpatient services will go up as much as 52 percent. Part D premiums, which cover drug benefits, will increase an average of 13 percent, and everyone will see their annual Part B deductible rise from $147 to $223.
These are not trivial amounts considering that half of all people on Medicare are living on annual incomes of $24,150 or less. In 2010, about 7 million people covered by the program lacked supplemental insurance such as Medigap policies, which cover what Medicare doesn’t. By 2013, the number of people without the additional coverage had more than doubled, most likely because they couldn’t afford to buy it.
What’s going on here? Weren’t Medicare’s costs supposed to go down thanks to the Affordable Care Act?
These increases have nothing to do with Obamacare and everything to do with the laws governing Medicare and Social Security.
Each year, the secretary of health and human services examines the spending for Part B services, which actually has risen this past year. By law, premiums paid by everyone on Medicare must cover 25 percent of the program’s cost. (General tax revenues cover 75 percent.)
And each year, the Social Security Administration determines the cost-of-living increases (COLA) for seniors based on the Consumer Price Index. There will be no increase for the coming year.
All this means about 30 percent of beneficiaries will see increases for Part B. Most people have their premiums deducted from their Social Security checks, but the law prohibits any Part B premium increase that would result in a reduction in their Social Security benefits. Without a COLA increase, a higher premium means a smaller Social Security check.
Because Medicare premiums must cover 25 percent of Part B costs, the government has to find the money somewhere. So four groups of people will have to shoulder the added financial burden.
They include those who begin receiving Medicare benefits in 2016, those older than age 65 who are on Medicare but who have not taken their Social Security benefits yet; wealthier beneficiaries (individuals with incomes above $85,000 and couples with $170,000) and low-income people eligible for both Medicare and Medicaid. State Medicaid programs pay those increases; and they, too, are grumbling.
Increases in Part D premiums stem from higher costs for both brand and generic prescriptions and particularly for specialty drugs like Sovaldi to treat hepatitis C.
Will Congress fix these inequities and find other funds to protect everyone from these increases?
“It’s very hard to predict what Congress will do,” says Tricia Newman, senior vice president at the Kaiser Family Foundation.
Newman points out this year’s higher premiums and deductibles might be temporary and are expected to come down in 2017.
The other day I explained all this on a New York City radio show along with Joe Baker, who heads the Medicare Rights Center, which helps beneficiaries from all over the country understand their options.
Callers on fixed incomes and tight budgets drove home the point: The increases will pinch. One woman told of a $300 rent increase she had to absorb along with higher prices for food and medicines.
Another said her husband had cancer, and the family had been socked with high medical costs. She said they had to pay a $3,000 deductible before insurance kicked in. Most likely she meant the requirement to pay $3,000 out of pocket before her Medicare Advantage plan pays benefits. That’s a common out-of-pocket limit for these types of plans. Even if she didn’t label the source of the problem correctly, she knew the family budget was in trouble.
That led to a discussion of the how the COLA adjustment is calculated and whether it is fair to seniors because they spend money on a different market basket of goods than younger Americans do. They spend more on health care, for example, and less on gasoline, which is heavily factored into the cost-of-living calculations.
But despite years of talk and experiments with a more accurate cost of living index for seniors, the government has yet to implement one.
Years ago, health care expert Marilyn Moon, who served as a public trustee of the Social Security and Medicare Trust Funds, urged Americans to save their money because they were going to need it for medical care when they got older.
This year’s situation shows how right she was.
Trudy Lieberman, a journalist for more than 40 years, is a contributing editor to the Columbia Journalism Review, where she blogs about health care and retirement at cjr.org. She can be reached at firstname.lastname@example.org. This column was distributed by The Rural Health News Service.