“According to the 2015 Medicare Trustees Report, about 30 percent of Medicare Part B beneficiaries will shoulder the full cost of the 2016 premium increase, resulting in a premium increase of 52 percent from $104.90 to $159.30 per month. This group includes federal retirees covered by the Civil Service Retirement System (CSRS) and state retirees who are excluded from Social Security coverage. [For an update on the increase, read comments below].
“The 2015 Medicare Trustees Report projects Part B premiums will increase in 2016, primarily due to higher than expected utilization of outpatient (Part B) services. Without the effect of the hold harmless provision (explained below), Medicare Part B premiums would be expected to increase from $104.90 per month to $120.70 per month. But because there will be no cost-of-living adjustment (COLA) to Social Security benefits, premiums are expected to increase to $159.30 per month for the 30 percent of enrollees who are not held harmless.
The Hold Harmless Provision:
“Pursuant to 42 U.S.C. 1395r(f) - the so-called hold harmless provision - the dollar increase in the Medicare Part B premium is limited to the dollar increase in an individual's Social Security benefit from the annual cost-of-living adjustment. This provision applies to most beneficiaries whose Medicare Part B premiums are deducted directly from their Social Security checks. Because there will be no COLA to Social Security benefits, the hold harmless provision will apply to an estimated 70 percent of Medicare beneficiaries in 2016, meaning for most, their Part B premium will remain stable at $104.90. The remaining 30 percent will be forced to shoulder the full premium increase.
Premium Cost-Shifting Effect:
“Pursuant to 42 U.S.C. 1395r(a)(1), the Secretary of Health and Human Services (‘the Secretary’) estimates a monthly actuarial rate for enrollees ages 65 and older based on the projected benefits and administrative costs payable from the trust fund for the upcoming calendar year. This subsection also directs the Secretary to include ‘an appropriate amount for a contingency margin.’
“Pursuant to 42 U.S.C. 1395r(a)(3), the standard monthly premium is half of the monthly actuarial rate (or 25 percent of Part B costs, including the contingency margin). That monthly premium is then reduced pursuant to the hold harmless provision (or increased due to late-enrollment penalties or for individuals with high incomes).
“The Administration interprets these sections to allow the Secretary to take into account the lost premium income resulting from the application of the hold harmless provision when setting the contingency margin. In this way, the lost premium income spirals back up to the determination of the monthly actuarial rate, which determines the standard monthly premium.
“While it appears the Administration believes, it has some flexibility to set a lower contingency margin - and thus a lower monthly premium - it does not appear it believes it has the ability to prevent those who are not held harmless from shouldering a disproportionate burden of premium costs.
Who Is Not Held Harmless?
“Enrollees who will not be held harmless, and thus would be forced to pay more, include state government retirees, teachers, who do not receive Social Security (or do not receive large enough Social Security payments to pay Part B premiums from their Social Security checks).
“Other adults and people with disabilities affected by the projected premium increase include new Medicare enrollees in 2016 (2.8 million); individuals not collecting Social Security benefits or only collecting minimal Social Security benefits, including the previously mentioned federal retirees covered under CSRS with insufficient private-sector earnings (1.6 million); and beneficiaries already paying higher, income-related premiums (3.1 million). Nine million beneficiaries dually eligible for Medicare and Medicaid also are subject to the higher premiums, but state Medicaid programs will bear this cost.
“There are two possible solutions currently being discussed in Congress and the U.S. Senate -that would apply the effect of the hold harmless provision to all Medicare beneficiaries: H.R. 3696, the Medicare Premium Fairness Act, introduced by Rep. Dina Titus, D-NV; and S. 2148, the Protecting Medicare Beneficiaries Act of 2015, introduced by Sen. Ron Wyden, D-OR.
“This same problem arose to a less severe, but still significant degree in 2009, and essentially identical legislation, H.R. 3631, the Medicare Premium Fairness Act (111th Congress) passed the House by a vote of 406 to 18, though it never received a vote in the Senate.
“For additional information, there is an attached link to a blog post from AARP on the issue, and more importantly at the bottom of that post, the text of a letter AARP sent to every Member of Congress on Wednesday. As you can see, we're calling on Congress to ‘protect the 16.5 million Medicare beneficiaries (which includes new enrollees, people not collecting Social Security, and beneficiaries dually eligible for Medicaid) from the harmful effects of dramatically increasing premiums, due to there being no Social Security COLA, as well as protect all Medicare beneficiaries from the large increase in their deductible.’”