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Increasing Premiums and Deductibles Medicare Part A and Part B

Every year, those with Medicare or Medicaid must reexamine their expenses as premiums change, deductibles go up, and new laws go into effect. The Centers for Medicare & Medicaid Services announced changes to the 2016 premiums and deductibles for Medicare Part A and Part B programs. Here’s what you need to know.

Premiums Are Going Up

Most people with Medicare Part A aren’t required to pay insurance premiums. For those who do, however, the premium is increasing slightly from $407 per month to $411 per month in 2016.

For those with Part B, it’s a little more involved. In 2015, people with Medicare Part B paid $104.90 each month. That rate is increasing to $121.80 in 2016. However, those who meet certain qualifications will be “held harmless.” Because the Social Security Administration announced that there would be no Social Security cost of living increases for 2016, by law, most people with Part B will be grandfathered in and keep the current rate of $104.90

To maintain that lower monthly premium, at least one of the following must apply:

  • You are collecting Social Security benefits
  • You were enrolled in Medicare Part B before 2016
  • You are not eligible to have your expenses paid by Medicaid
  • You do not pay a higher income-based premium

Medicare estimates that about 70 percent of those with Medicare will be eligible to retain the lower rate.

Hold Harmless Provision

What about Deductibles?

You’ll also see an increase in your deductibles this year. In 2015, the hospital insurance deductible for people with Medicare Part A was $1,260. That will go up to $1,288 in 2016. For the first 60 days, your coinsurance for the benefits period will remain at zero dollars. However, for days 61-90 of a hospital stay, your coinsurance will be $322 daily in 2016, up from $315.

For those with Part B, the deductible will be $166 per year in 2016, up from $147 in 2015. After you meet your deductible, you typically will pay about 20 percent of the Medicare-approved amount for most services, including inpatient services, outpatient therapy, and durable medical equipment.

Why Are the Rates Changing?

It’s all about the budget. Lawmakers estimate that by raising premiums on a few, states will save a total of $1.8 billion dollars. According to CMS Acting Administrator Andy Slavitt, the goal is to keep premiums affordable while keeping Medicare up and running and building a better health care system.

Because 2016’s Cost of Living Allowance (COLA) is expected to remain the same, increases in the cost of medical care have to be spread out among policyholders rather than raised in proportion to the higher COLA. That explains the significantly higher premiums for those who aren’t “held harmless.” The idea is that higher costs are only passed on to those with higher incomes, but the few that do get a raise will be paying significantly more out of pocket than they did in 2015.

Medicare Trustees say this is only a one-year event, not the start of a new trend, and that premiums will increase much more gradually in the future.

If you have questions about your expenses for next year and want to have your Medicare situation reviewed, feel free to contact us for help.