Medicare premiums have been projected to rise by 52% in the oncoming year.
Why the jump?
Medicare Part B pays for physician visits and outpatient services. Physician costs have been rising faster than the prices in the rest of the economy has been. Medicare expenditure in 2014 totaled $613.3 billion.
However, total income for Medicare only totaled $599.3 billion. The Medicare program needed to reel in more money in order to close the gap and keep pace with the rising costs of physician care.
Who will be affected?
The increases in premiums will not affect everyone who has Medicare. The standard monthly premium in 2014 was $104.90. This is projected to jump to $159.30 per month.
Not everyone will feel the effect of the higher premium. The Medicare program has a “hold-harmless” provision. The provision, which includes nearly 70% of all Medicare users, limits increases in premiums to the amount of increase in Social Security payments.
Social Security payments are not projected to rise.. Social Security users are typically afforded a cost-of-living adjustment, COLA, which gives an increase in payment equal to the increase of the price level of the economy, allowing payments to maintain relatively the same buying power. However, over the past year, inflation has not risen, and with decreasing energy costs, the indicators that calculate the COLA point at deflation.
With many Medicare users receiving no COLA increase, they will fall under the hold-harmless provision. Since their premiums cannot increase, the burden will fall heavily on those who have Social Security payments which are larger than their Medicare premiums.
Retirees with annual incomes exceeding $85,000 will be the ones paying the heightened premiums. Those with incomes above $214,000 can expect to pay up to $336 monthly.
A double hit?
In addition to the higher premiums, deductibles are predicted to increase by up to 52% as well. Deductibles were only $147 annually in 2014, but are projected to jump to $223 per year in 2016.
This means retirees are facing a rough period ahead. Monthly premiums will increase, and more will be expected to be paid out-of-pocket, in addition to receiving no COLA on their Social Security payments.
With the increase in medical expenses, it is important to revisit your financial goals and be sure your budget is prepared to handle the strain. Know where you can cut back to be able to pay for the costs, or have a good financial plan to generate the income you need to be ready.
