Note: For information on Medicare premiums in 2017 click here. The post below explains why Medicare premiums are increasing.
Some people with Medicare could face a 20% increase in their Part B premiums in 2017 unless Congress intervenes this fall and prevents it. The warning of the increase came in late June in the annual report of the Medicare Trustees to Congress, on the financial state of the program.
The trigger for the increase is complex but has to do in part with increasing costs in Part B, which covers doctors visits and other types of outpatient care. A 2015 law that prevented premium increases for 2016 for most people with Medicare collecting Social Security benefits is a contributing factor in the increase.
The Trustees report indicates that up to a third of people paying $121.80 a month for Part B in 2016—up from $104.90 in 2015 for many—could see another increase to as much as $149. Congress may view that as too significant an uptick in a short period and move to limit it, especially in an election year.
Increases of the same magnitude or more could be in store for wealthier people with Medicare, too. Since 2007, individuals earning more than $85,000 and couples earning more than $170,000 a year—about six percent of the Medicare population—pay substantially higher premiums than everyone else with Medicare.
Medicare notifies people of their Part B premium changes for the following year in the fall, before Medicare open enrollment, which occurs in November and December.
Part of the reason for the increase is that all Medicare costs, including for Part B, are trending upwards as more baby boomers enter the program and healthcare costs have again ticked up. For example, Part B costs rose an average 5.6% a year from 2010 to 2014; that average rate of rise is projected to increase to 6.9% a year from 2015 to 2020.
The average per person cost is projected to rise from $12,925 in 2016 to $19,400 in 2025. That reflects an average annual rate of increase over the next decade of almost three times what it was in the years 2010 to 2015 (4.3% versus 1.5%).
At the same time, Medicare enrollment is projected to rise from 57 million today to 73 million in 2025 as 10,000 baby boomers enter Medicare every day.
As a result, the Medicare hospital trust fund (Part A of the program) is projected to be insolvent by 2028, two years earlier than the Trustees projected last year, the Trustees said.
Even so, they expressed mild optimism that the Affordable Care Act (Obamacare) and several other recent laws were constraining the overall growth in healthcare costs, even as they asserted strongly that more needs to be done. In their words: “Notwithstanding recent favorable developments, current-law projections indicate that Medicare still faces a substantial financial shortfall that will need to be addressed with further legislation. Such legislation should be enacted sooner rather than later to minimize the impact on beneficiaries, providers, and taxpayers.”
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