Who Will Pay More for Medicare Part B in 2016 and Why

Posted by Medicare Made Clear

A 16% increase set the base Medicare Part B premium at $121.80 a month for 2016. That’s much less than the 52% hike that many feared. But most Medicare beneficiaries will pay the same amount in 2016 as they did in 2015–$104.90 a month. How can this be?

Hold Harmless Rule Holds 2016 Part B Premium Down for Most

The hold harmless rule states that the Part B premium increase in a given year can’t be more than the Social Security cost of living adjustment (COLA) adds to your check.

There is no Social Security COLA for 2016. This means that the Part B premium amount cannot go up at all for beneficiaries who are “held harmless.” Their monthly 2016 Part B premium will stay flat at $104.90. This applies to most Medicare beneficiaries who have their Part B premium deducted from their monthly Social Security checks.

2016 Part B Premium Increases for Some

By law, the premiums paid by Medicare beneficiaries must cover 25% of expected Part B costs for the year. Medicare costs are projected to go up in 2016. The hold harmless rule effectively shifts the cost increase to beneficiaries who are not protected by it. This includes you if:

You are not collecting Social Security benefits.
You enroll in Part B for the first time in 2016.
You pay an income-related monthly adjustment amount.
You are dual eligible and get both Medicare and Medicaid benefits. (Your state Medicaid program will bear the cost increase.)

The 2016 Part B premium is $121.80 a month for most people in the not-held-harmless group. It could be as high as $389.80 for those who pay an income-related monthly adjustment amount.

Federal Funds Help Bridge Gap

A federal budget agreement succeeded in keeping the 2016 Part B premium increase down to 16%. This is a relief for many who were facing the possibility of a much larger premium hike. But the budget agreement does not erase the fact that Medicare costs are expected to rise.

A transfer of federal funds will bridge the gap between the 16% premium increase and the actual amount needed to cover beneficiaries’ share of the projected Medicare Part B costs.

The funds will be repaid over time, starting with a $3.00 surcharge included in the 2016 premium increase for those not held harmless. The surcharge is expected to be added to the Part B premium for all beneficiaries starting in 2017.