Are Medicare Part B Premiums Going Up in 2016?

There has been a lot of talk about increases to Medicare Part B premiums for 2016. money rates going upAlthough the new Medicare Part B premiums have not been announced or finalized, it is almost certain that they will indeed be going up for some people. The issue is somewhat complex – this article explains how it works and if you are affected by the changes.

First of all, Medicare is required by law to charge Part B premiums high enough to cover 25% of its projected Part B expenses. So, when health care costs rise, so do Part B premiums.

However, there is a “hold harmless” provision that project Medicare beneficiaries from higher Part B premiums if there is no corresponding Social Security cost-of-living increase (COLA). Currently, it is projected that there will be no cost-of-living increase (COLA) to Social Security for 2016. This is almost certain and not likely to change.

The “hold harmless”  provision only applies to approximately 70% of people on Medicare. Several groups don’t get the benefit of that provision, and thus, subject to the higher Medicare Part B premiums. Those groups are:

  • New Medicare beneficiaries (i.e. turning 65 or going on Medicare Part B for the first time in 2016).
  • Individuals or households who have incomes that are higher than $85,000 per year (or $170,000 for couples).
  • People who have chosen to pay Medicare Part B premiums directly rather than have them deducted from a Social Security check (either by choice or because they are not receiving Social Security).

So, what options do you have if one of these applies to you and you are in the 30% that don’t get the benefit of the “hold harmless” provision.

  1. First of all, you could delay Medicare enrollment until 2017. If you have the option of continuing to work and maintaining creditable coverage, it may make sense to do so.
  2. If possible, you could reduce taxable income to get you below the Medicare thresholds (see chart below). You should talk to your accountant about this possibility and strategies for doing so.
  3. Lastly, you can pay your Medicare Part B premium through Social Security witholdings if you do not already do so. If you are not receiving Social Security now, it may not make sense to do so just to avoid the higher premiums, but this is an option to explore.

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