The Doc Fix and your Medicare Part B and D premiums.

In my last article, I discussed the Doc Fix legislation and how it affects Medicare Supplement plans’ C & F coverage of the Part B deductible.

Now I want to address how the Doc Fix connects with premiums for Part B and Part D of Medicare and related costs/expenses.

It used to be that everyone paid the same for Part B (Medical Insurance), which, by law, is supposed to be 25% of average expenditures (the amount the government spends covering costs those plans). Part A of Medicare (Hospitalization) is usually without cost as long as you paid into Medicare for 40 quarters.

Things changed. Those with higher income began being required to pay a higher dollar amount for both Part B and Part D. This is under a program called IRMAA (Income Related Monthly Adjustment Amount). Currently, there are five income brackets used to determine what a Medicare beneficiary pays for B & D.  Starting in 2018, there will be six. Most people won’t be affected by this. Although, those in some higher income brackets will see their Part B premium increase. This increase could be as high as up to 30% over what they would be today. These new brackets are not indexed for inflation. They are set amounts which will result in more seniors entering those brackets each year due to inflated incomes as time goes on.

It’s become an engrained governmental philosophy in our country that those who make more, pay more.

The government is depending on those higher-income seniors paying higher premiums to help pay total costs. But, it could just be that those being told they will have to pay up to $335 a month for Part B premiums alone may decide to self-insure and drop Part B. The resulting loss of premium would then have to be spread between everyone else signed up for B. This causes increasing premium costs for most if not all Medicare beneficiaries. Part D will be changed in a similar manner. Although some seniors will see premium increases up to about 60%. This depends on which prescription drug plan they have.

Health care costs, although relatively flat the over the past few years are expected to begin rising again. Over the next ten years (2015 – 2025) Part B premium (for those in the lowest income bracket) is expected to rise from the current $104.90 to about $181 per month to cover the 25% average expenditure.

The total amount seniors pay for health care (Part B & D premiums, Medicare Supplement plan premiums, medical, dental, vision, and prescription costs) over the next 20 years is expected to go up by over 3 ½ times what it is now.

Taking all of this into consideration is vital for your retirement plans. No-one wants to outlive their money due to health care costs.

Insuring against medical bills remains the best way to prevent huge health expenditures. Time and time again over the years I’ve seen a hundred thousand dollar hospital bill completely paid by an insurance company. This was because my client was properly protected.

Jake Young

Individual and Family Specialist since 2002