Medicare Part B, the insurance that covers the regular health care needs, requires you to pay a monthly premium. These premiums are usually indexed for inflation within specified periods and revised accordingly. Often, what you pay in one-year changes in the year to come. Beyond than inflation, these premiums are also affected by your income. The more your income earning, the higher your premium is likely to be. So the question now, towards the end of 2017, becomes, what will be the Medicare Part B premiums for 2018?
The costs for insurance coverage are something many people do not anticipate. It often comes as a surprise when you realize the costs to be higher than expected. Fortunately, it is easy to make cost estimates that can help you plan. Here, we will take a closer look at what is likely to change of Part B premiums, how much it might cost you and what will inevitably change.
The current state of Medicare Part B and projected changes
As it is, Medicare Part B is based on household income. The premiums are usually modified according to the gross income (MAGI). The Social Security pulls your IRS tax returns for two years before and uses those records to determine what you pay for Part B. Your modified adjusted gross income (MAGI) depends typically on wages, interests, capital gains and dividends. It also covers your pensions and Social Security benefits. The total household income does not include things like life insurance and reverse-mortgage.
Social Security bases premiums for married couples who file jointly on their income. However, you each pay your part of the premium. Your household income only serves as a baseline for determining the amount you pay.
The practice over time has been that Social Security mails the premium you pay the next year in December of the previous year, or January if there is a delay. Then, only five percent of all Medicare beneficiaries pay higher premiums. However, in 2018, Medicare will adjust the highest earning brackets downwards so that well-off retirees will pay higher. This will up the number of Americans who will be paying higher premiums.
Who will be affected by the new income tiers?
The principle is this: those who can afford to pay more do. This idea has been in operation since 2007 since the introduction of IMRAA (Income-Related Monthly Adjustment Amounts). There have been income brackets that determine the monthly premiums you pay. Individuals with an income of $85 001 to $107 000 were charged 35% in costs which totaled to about $187.50 in monthly premiums. The second bracket, ($107 001 to $160 000) paid 50% ($267.90), the third paid 65% and the fourth, 80%.
Under legislation passed in 2015, the second, third and fourth brackets will adopt lower income thresholds. This will raise premiums for many seniors who fall there. The brackets will change as follows:
- Bracket two – individuals with incomes between $107 001 to $133 500 and not $107 001 to $160 000
- Bracket three – $133 501 to $160 000
- Bracket four – individuals making more than $160 000.
Medicare Part B premiums for 2018 for couples will also be affected. These changes will make it more difficult for higher income individuals to choose part B. It is essential that if you have divorced or moved to a part-time status, you ask Social Security for the new IRMAA determination.
‘Hold harmless’ provisions
Every year, the CMS (Centers for Medicine and Medicaid Services) sets the Part B premium. If you receive Social Security benefits with premium deductions from these benefits, you may qualify for “under the hold harmless” cover. This provision protects seniors getting social security from paying high part B premium costs.
To qualify for lower Medicare part B premiums for 2018 under the hold harmless provision, you have to have been receiving social security benefits for the months of November and December this year. Your COLA (Cost of Living Adjustment) amount has also to be insufficient to cover the increased costs. COLA is an additional benefit for social security recipients to protect against inflation.
If you are new to Medicare, the provision will not cater to your needs. To be protected, you need to have enrolled to Medicare for at least one year. You will also be unprotected if you fall under the IRMAA, meaning you have higher annual earnings, or are enrolled in an MSP (the Medicare Savings Program) but you lost it. You must remember that if you qualify for the provision, but you pay a late penalty fee for Part B, you will not qualify for a penalty waiver. In fact, the costs may go up because they will make calculations with relation to the new premium rates.
How much will Part B cost most enrollees?
Medicare Part B premiums for 2018 will remain at $134 for many new people who pay based on income. As usual, social security will deduct the premium from social security for those who get the benefits. Otherwise, you will be billed quarterly if you do not get Social Security benefits. If this year’s, part B premium increased by over two percent more than the annual cost of living by the social security, enrollees will pay more than $109 but less than $134. Everyone else who was paying $109 in 2017 will be paying $134.The good thing with all these is that you do not have to calculate your premiums for yourself. If you enroll for part B in 2018 or did in 2017, you will still pay the standard premium.
Part B deductibles will remain flat in 2018. If you are earning below $85, you will pay $134, and a deductible of $183 like you did in 2017. On average, seniors will pay $130 in Part B premiums, and 20% of the Medicare-approved amount as coinsurance. If you have Medicaid, even though the state will pay the standard $134, you will still pay higher premiums.
Medicare Part B premiums for 2018 are still a mystery for many because of the changes that will be taking effect then. The good news is, even if they affect you, you should expect an email notification from Medicare between November and early January. To find out how much you will be paying, you can just inquire through Social Security, and they will do the mathematics for you.