Medicare Rates Set to Soar

Congress so far has failed to find a way to stave off an unprecedented premium increase for millions of recipients in 2016

By Stephanie Armour and Anne Tergesen
Oct. 14, 2015 7:37 p.m. ET

Congressional lawmakers so far have failed to agree on a way to stave off an unprecedented premium increase for millions of Medicare recipients for 2016.

That is creating uncertainty for many seniors on Medicare Part B, which covers outpatient care such as doctor's visits. About 30% of the roughly 52 million people enrolled in Part B could see a 52% rise in those premiums if Congress and the Obama administration don't find a way to freeze or reduce the increase.

Open enrollment for Medicare for 2016 starts Thursday, though Congress could subsequently act to prevent the rise.

Pressure on Congress is mounting because many state budgets also would be hard hit. The premium increase would affect about nine million lower-income Medicare beneficiaries whose premiums are paid by state Medicaid programs because they are eligible for both plans. Many of those state programs are already stretched thin.

New beneficiaries, those with high incomes and Medicare recipients who don't get Social Security would be hit with the increase. For them, the standard Part B premium would rise about $55 a month, or about $650 a year. Higher earners would pay even more.

The rise in premiums seems increasingly likely because the Social Security Administration is expected to announce Thursday that low inflation means Social Security beneficiaries won't get a cost-of-living increase for 2016.

Most Medicare recipients have premiums deducted from Social Security. A “hold harmless� provision of the Social Security Act protects about 70% of Medicare recipients from having their Social Security checks reduced if Medicare premiums rise but Social Security benefits don't.

But the government must spread out projected Medicare cost increases among those who aren't covered by the provision. That means millions could face the higher rate.

Health and Human Services Secretary Sylvia Mathews Burwell has said her agency would search for ways to curtail the increase. The agency is expected in coming weeks to announce Medicare Part B 2016 premiums and deductibles and any programs that may reduce the anticipated premium jump.

The White House also said it is aware of the concerns. “We share the goal of keeping Medicare's premiums affordable, are exploring all options, and appreciate the interest and ideas of members of Congress,� said White House spokeswoman Katie Hill.

House Democrats including leader Rep. Nancy Pelosi (D., Calif.) have been working on legislation to protect seniors. House Speaker John Boehner (R., Ohio) has balked at a plan that wouldn't offset the billions of dollars in lost government income if premiums don't rise, staffers said. He and Mrs. Pelosi are continuing to work on the issue, they said. A senior Democratic aide said both want to find some way to make up the income losses.

Some Senate Democrats back a bill that would prevent the increase. Legislation introduced this month by Sen. Ron Wyden (D., Ore.) doesn't specifically address ways to offset the hit, but Democrats are open to exploring options, according to staffers.

If no agreement comes together soon, Democratic staffers said a freeze or other fix to the premium increases might be part of any year-end budget deal in Congress.

Glen Hogue, a 66-year-old retired consumer researcher in Manhattan Beach, Calif., is tracking the political skirmish. He is among about 1.6 million Americans who could see the increase because he receives Medicare but deferred claiming Social Security benefits.

“A 52% increase kind of gets my attention,� said Mr. Hogue, who said he may consider signing up for Social Security if his Part B premium rises.

About 3.1 million more participants would be subject to the rise because of their incomes. The Medicare trustees projected that single individuals earning between $85,001 and $107,000—and couples earning $170,001 to $214,000—would see monthly premiums rise from $146.90 a person this year to $223 in 2016.

“Part B premiums have gone up before, but this increase is unprecedented,� said Matt Salo, executive director of the National Association of Medicaid Directors, which represents state Medicaid officials. In total, he said, the states may see costs surge by $2.3 billion if Medicare Part B premiums rise with no intervention.

Mr. Salo said states may cut services to Medicaid recipients or reimbursements to doctors and hospitals without a fix from Washington.

In an Oct. 1 letter to California's congressional representatives, the state's Department of Health Care Services estimated the state faces about $550 million in additional costs in 2016. “The fiscal impact to the State of California for these cost increases is significant and concerning,� the letter states.

“It's poor public policy to expect the states to cover the Medicare shortfall,� said Tom Betlach, Arizona's Medicaid director, who said the state faces $16 million in additional costs in 2016 due to the projected premium increase.

Some relief could come in later years. If Social Security recipients do get a cost-of-living adjustment in 2017, the “hold harmless� provision will affect a smaller portion of Medicare recipients. That means Medicare costs will be shared more equally. Indeed, the Medicare trustees are projecting that the base premium for Part B will reset for everyone at $120.70 a month in 2017.