As a direct result of the complex relationships between Social Security and Medicare, as well as a number of other unforeseen issues, 2016 will be an expensive year for some seniors, according to Forbes' recent article, "Untangling the Medicare Premium Mess -- And What It Means For You." Medicare laws require it to increase premiums annually to cover increases in per capita costs. This would typically be approximately $16, which most seniors can manage.
But 2016 will not be a normal year. Most retirees have their Medicare premiums deducted from their Social Security benefits, but because inflation was so low this year, there won't be a cost-of-living increase in 2016 for Social Security. And the law says that if Social Security benefits don't rise, neither can the Medicare premiums. At least, not for most people who get Social Security benefits.
About 70% of Medicare beneficiaries won't see the premium hike. However, that leaves the entire burden of this year's Medicare cost increases on the remaining 30%. Those hikes are going to be about 50% increases over the previous year.
The list of those who are unprotected is a bit curious. It includes high income seniors, new enrollees, those enrolled in Medicare but not receiving a Social Security check, and the so-called "dual eligibles" who receive Medicare and Medicaid benefits (as their premiums are paid by state Medicaid programs).
For high-income earners, those premium hikes are hefty: for a single person making more than $214,000, Part B premiums will increase from $335.70 to $509.80. For some, it would be cheaper to buy insurance through Affordable Care Act exchanges than to buy Part B plus Part D drug coverage and a Medigap policy. But they also might be better off with Medicare long term. It's complicated, and guidance from a professional will help you understand what coverage is right for you.
Seniors with more typical incomes also have some tough choices to make. For years, we've heard how the government and many financial experts encouraged seniors to wait to take their Social Security benefits for as long as they could. However, the special circumstances in 2016 may give some the exact opposite message, like those age 67, single, making less than $85,000, and enrolled in Medicare but not yet taking Social Security. The general rule is that you must pay a large increase if your premiums are not being deducted from your Social Security check. If you claim Social Security now and start having premiums deducted, you can save more than $500 in Medicare premiums in 2016, and you start getting Social Security benefits.
But it's a trade-off, because you may also receive less in lifetime Social Security benefits. You'll need to do some math and Consult a professional. The answer will depend on how much money you make, your best guess about how long you will live, and your marital status.
If you are looking for more information, Family Estate Planning Law Group has relationships with many other professionals who may be able to help. Please reach out to us for a discussion on what professionals might be a fit for you.
Reference: Forbes (October 9, 2015) "Untangling the Medicare Premium Mess -- And What It Means For You"