Government announces surprising hike in Medicare Part B premiums

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Yikes. As I was extolling the virtues of Social Security’s 5.9% COLA, the Centers for Medicare and Medicaid Services (CMS) announced that they were increasing the premium for Medicare Part B by 14.5%.  

As a reminder, Medicare is composed of 2 programs. Part A, Hospital Insurance (HI), which covers inpatient infirmary services, skilled nursing facilities, location healthcare, and hospice care. HI is financed chiefly by a 2.9% payroll tax, shared arsenic by employers and employees. The 2nd and larger programme is Supplementary Medical Insurance (SMI), which consists of 2 abstracted accounts: Part B, which covers doc and outpatient infirmary services, and Part D, which covers medicine drugs. SMI is financed by a operation of wide revenues and subordinate premiums. The Part B premium is acceptable astatine 25% of projected programme costs.

Read: Seniors get the biggest Social Security rise successful years — and it’s already eaten up by inflation

With a 14.5% increase, the Part B premium for a azygous idiosyncratic — with income little than $91,000 — is slated to emergence from $148.50 successful 2021 to $170.10 successful 2022. And since Medicare premiums summation with income, individuals with income of $170,000 to $500,000 volition spot their premium summation from $475.20 to $544.30. (See Table 1 for 2022 premiums.)

How did this hap erstwhile healthcare costs grew by lone 0.4% successful the past twelvemonth (see Figure 1)? And the announced summation was besides importantly higher than the 6.7% predicted by the CMS Trustees successful August

Apparently, the summation was owed to 3 factors, 2 reasonably regular and 1 horrifying. The regular factors include: 1) projected rising prices and increases successful strength of care; and 2) making up for a headdress successful Part B premium increases successful 2020.

Read: Premiums, deductibles, and copays volition beryllium higher — Medicare changes for 2022

The horrifying source of the summation relates to Aduhelm, the caller Alzheimer’s cause estimated to outgo $56,000 a year. While the process is inactive nether mode to find whether and however Medicare volition screen Aduhelm, CMS decided to summation “contingency reserves” to screen imaginable importantly higher expenditures successful the future.

As an aside, the crushed that Aduhelm falls nether Part B alternatively of Part D is that it is administered successful physicians’ offices alternatively than purchased astatine a pharmacy. One accusation of being nether Part B is that accepted enrollees person to pick up 20% of the cost of astir Part B medications, which would construe into astir $11,200 successful out-of-pocket costs for those prescribed Aduhelm.  

So wherever does this tremendous summation successful premiums permission Social Security beneficiaries aft they wage the higher premium? An idiosyncratic presently receiving $1,600 a period (the approximate mean retiree benefit) volition spot benefits spell up by $94 from the COLA, but wage $22 much successful Medicare premiums, resulting successful a nett summation of $72 oregon 4.5% of the archetypal payment amount. Thus, portion the Part B summation does not destruct the COLA, it earnestly erodes its ostentation protection.    

But the happening that truly scares maine is that a determination to screen Aduhelm could pb to spiraling Medicare costs and premium increases that swamp Social Security COLAs successful the future, eroding the purchasing powerfulness of benefits. And, from speechmaking property accounts, it’s not adjacent wide that Aduhelm is peculiarly effective. I anticipation idiosyncratic makes astute decisions here.

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