(The writer is a Reuters columnist. The opinions expressed are
his own. For more from Mark Miller, see link.reuters.com/qyk97s)
By Mark Miller
CHICAGO, November 16 The rising cost of Medicare
premiums will take a bigger bite out of seniors' wallets next
year - but the amount will be smaller than was predicted by a
federal government forecast earlier this year.
The monthly premium for Medicare Part B (outpatient
services) will jump 5 percent in 2013 to $104.90, the Centers
for Medicare & Medicaid Services announced on Friday. The
increase -- which amounts to $5 instead of the $9 that had been
predicted by the trustees of the Medicare program -- will
consume part of the already-small Social Security cost-of-living
adjustment next year for middle class recipients.
CMS also said the annual Part B deductible will rise $7 to
$147, and that the Part A (hospitalization) deductible will be
$1,184, a $28 increase.
High-income seniors, who already pay steep surcharges on top
of the standard premium, will see additional hikes ranging from
$42 to $230.80 per month.
A $5 increase in premiums may not sound like a big deal. But
it comes at a time when Washington is gearing up for "fiscal
cliff" negotiations that could lead to further squeezes on
seniors in the form of more Medicare cost-shifting or smaller
Social Security COLAs.
For less-wealthy recipients, the changes will be felt in the
form of a smaller-than expected Social Security benefit
increase. The Social Security COLA next year is 1.7 percent.
After the Part B premium is deducted, a senior with a $1,000
monthly benefit will receive a net increase of $12, or 1.2
percent. For someone with a $2,000 monthly benefit, the net
increase will be $29, or 1.45 percent.
The lower-than-expected Part B premium hike means that the
vast majority of retirees (those with monthly benefits over
$300) will receive at least some COLA next year.
Social Security Administration data shows that fewer than 3
percent have benefits below that level. Those in that category
are protected by a "hold harmless" provision of federal law that
prevents benefits from falling from year to year for anyone
whose premium is auto-deducted from benefits. That means their
Medicare premium cannot rise by a greater amount than the COLA.
That provision does not apply to high-earning recipients or
to people who are signing up for Medicare for the first time in
2013. Seniors who earn so little and have so little that they
qualify for Medicaid (and Medicare) are not affected, because
their premiums are paid by their state programs.
HIGH EARNERS WILL SEE BIG INCREASES
Seniors with annual ordinary income over $85,000 (single
filers) or $170,000 (joint filers) pay the full 5 percent Part B
increase, plus surcharges that go up as income rises. Their
total Part B monthly premiums will range from $146.90 to a
whopping $335.70 per month for the wealthiest seniors.
High-income seniors also pay surcharges on their Part D
prescription drug plans.
Very few seniors have enough income to trigger the
surcharges - after all, most of them are retired. But their
numbers are increasing as more older Americans keep working past
the traditional retirement age - and with growing talk about
"means testing" Medicare, it's worth keeping in mind that
wealthy seniors already are paying substantially more.
The Social Security Administration determines who pays the
premium surcharge using recent tax returns. Eligibility is
determined on the basis of a measure called "modified adjusted
gross income," or MAGI. That is the total of adjusted gross
income (typically including a portion of Social Security
benefits) and tax-exempt interest income. If your MAGI is higher
than the income threshold, you'll get a letter from the SSA
telling you what your premium will be, including the surcharge.
You can challenge the surcharge determination if your
financial circumstances have changed since the 2011 tax return
was filed. Examples include an income decline, or a change in
marital status. More information on challenging the surcharge is
available at the Social Security Administration website (here#a0=4).
For the long term, recipients can consider tax strategies to
help keep them underneath the surcharge trigger. One option is
to take withdrawals from a Roth individual retirement account.
They are not counted in Social Security's definition of taxable
income. You can also alternate withdrawals from taxable accounts
and non-taxable accounts so that you don't have to pay the
surcharge every year.
Senior advocates expressed relief that Medicare premiums did
not rise more - but noted that the long-range trend has been
"It's good to hear that Part B premiums didn't increase as
much as initially forecast," said Mary Johnson, policy analyst
for The Senior Citizens League. "Still, the Part B premium has
increased 130 percent since 2000 - that's almost as fast as the
growth in gasoline prices."
(Follow us @ReutersMoney or here.
Editing by Linda Stern and Dan Grebler)