Myth of the $247 Medicare Part B Premium

En español | Q. I just received an email saying that under "Obamacare" our Medicare Part B premiums will rise to $247 a month by 2014. Is this true?

A. No, it isn't true. A mass email making this claim has been circulating since before the 2010 elections. But it's just another attempt to scare older Americans and has no basis in fact.

See also: What you need to know most about Medicare.

The official formula for determining Part B premiums was established by Congress decades ago. The standard premium amount for each year is always calculated on the level of Medicare health care costs in the previous year — and reflects the fact that the government pays 75 percent of Part B costs and beneficiaries pay 25 percent.

This process is in no way affected by the new health care law, officially known as the Affordable Care Act. The law does, however, contain provisions to reduce the rate of Medicare costs over time (without reducing guaranteed benefits), and if this plays out as planned, it could hold Part B premiums down or possibly even lower them.

The standard Part B premium for 2012, announced in October 2011, will be $99.90 a month.  But there is no way of accurately predicting what it will be in 2013, 2014 or any future years.

Part B premiums affected by Social Security COLA

However, another much older law did affect Part B premiums in 2010 and 2011 in an unprecedented way. That law prohibits a premium increase in any year when there is no Social Security cost-of-living adjustment (COLA). So in the past two years when — for the first time in more than 30 years — there was no COLA, most people's premiums were frozen at the 2009 level, $96.40 a month.

But this "hold harmless" provision did not apply to about 25 percent of Medicare beneficiaries. They include people who did not have their premiums deducted from Social Security benefits (but paid Medicare directly), those who were new to Medicare, and those who paid higher premiums because their incomes were above a certain level.

These people bore the brunt of rising Medicare costs. Therefore, their standard Part B premiums were $110.50 a month in 2010 and $115.40 in 2011 (or more if they paid the higher-income surcharge) — whereas everybody else still paid $96.40.

However, there will be a Social Security COLA in 2012 and this changes the situation.  The standard 2012 Medicare Part B premium will once again be a single dollar amount—$99.90 a month.   For people who’ve been paying $96.40 for the past three years, this means an increase of $3.50 a month.  But for those who have been paying $110.50 or $115.40, the new premium is a lot lower—dropping by $10.60 and $15.50 a month respectively. 

Higher income-related premiums

While the email makes bogus predictions about future increases in the standard Part B premium, the new law does make two changes that affect Medicare premiums.

Ever since 2007, under a law passed in 2003, people with Medicare have paid a surcharge on their standard Part B premiums if their modified adjusted gross income, as shown on their latest tax return, is higher than $85,000 for a single person or $170,000 for a married couple filing joint returns.

Currently, fewer than 1 in 20 beneficiaries pays higher-income premiums. But that percentage is likely to grow in coming years — and this development is the result of the new health care law. The law froze the income brackets at 2010 levels through 2019, which means that more older Americans will become liable for the surcharge — up from 5 percent now to 14 percent by 2019, according to an estimate from the Kaiser Family Foundation.

The new law also required the same wealthier beneficiaries to pay a premium surcharge for Medicare Part D prescription drug coverage for the first time, starting in January 2011.

Everybody subject to the higher-income surcharges will see somewhat lower costs in 2012.  That’s because they are charged in addition to the standard Part B premium, which will fall from $115.40 in 2011 to $99.90 in 2012.

For details of these surcharges, see the Social Security publication "Rules for Higher-Income Beneficiaries."

Patricia Barry is a senior editor with the AARP Bulletin.