John J. Diak, CFP®
You Will Probably Pay More for Medicare in 2018
If you have been shielded from higher Part B premiums, that shield may disappear.
Was your monthly Medicare Part B premium less than $110 in 2017? In 2018, you may pay considerably more for the same coverage. More than 40% of Medicare recipients will pay monthly Part B premiums of $134.(1) What is prompting this 23% increase? The biggest factor is the 2.0% cost-of-living adjustment to Social Security benefits for 2018.(1) Social Security is getting its first significant COLA since 2015. There was no COLA in 2016, and benefits grew just 0.3% in 2017.(1) When the federal government’s Consumer Price Index measures only minor yearly inflation, Social Security receives little or no COLA for the following year. In such instances, Medicare’s “hold harmless” clause helps many of its enrollees.(1) The “hold harmless” rule says that on an annual basis, Part B premiums cannot increase more than Social Security’s COLA. While it does not apply to all Medicare recipients or all aspects of Medicare coverage, it does limit some Medicare costs.
Last year, the “hold harmless” statute held Part B premium costs down for about 70% of Medicare enrollees. While around 30% of Medicare recipients paid $134 per month for Part B coverage, others paid Part B premiums of just $107-109 as a result. (1)(2) In 2018, the standard monthly Part B premium is $134 – unchanged from 2017. The difference is that many more Medicare recipients will have to pay the standard Part B premium this year, rather than a discounted one as in 2016 and 2017.(2) The Centers for Medicare & Medicaid Services details this a bit further. In 2018, about 42% of Medicare recipients will pay the standard Part B premium even though they are subject to the “hold harmless” provision, as the annual increase in their Social Security benefits will equal or surpass the increase in their Part B premiums. Around 28% of recipients will pay somewhat less than $134 a month for Part B, since the annual increase in their Social Security benefits will be less than the increase in their Part B premiums.(2) There will be no change to the annual Part B deductible. It will stay at $183 in 2018. The annual Part A inpatient hospital deductible, though, is rising $24 to $1,340 in 2018.(1) Those who happen to make more than $85,000 while receiving Medicare benefits face higher Part B premiums. They range from $187.50-$428.60 in 2018, the same as in 2017.(1) On average, Part D premiums will drop by $1.20 in 2018. The CMS projects a mean monthly premium of $33.50 for a prescription drug plan – the first reduction in premiums since 2012. Since the “hold harmless” rule does not apply to Part D premiums, there is a chance that your Part D premium could rise for 2018. If it comes out of your monthly Social Security benefit, then your monthly Social Security payment could thereby be a bit lower.(2) Part C premiums are also projected to decrease. Medicare Advantage plans will have a mean monthly premium of $30.00 in 2018, according to CMS estimates, $1.91 lower than in 2017. If you are keeping your current Medicare Advantage plan, take note: the CMS projects that 77% of Medicare enrollees retaining their plans will see no premium increase or lower premiums in 2018.(2) This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations. 1 - cnbc.com/2017/11/17/medicare-part-b-premiums-jumping-23-percent-for-many-retirees.html [11/17/17] 2 - thestreet.com/story/14404346/1/most-people-with-medicare-part-b-will-pay-higher-premiums-in-2018.html [11/29/17]