Help AARP Foundation raise $125K by March 29 to fight hunger. Donate Now

 

Get Set for Rising Part B Fees

Q. I’m just joining Medicare and have been told that I must pay $110.50 a month for the Part B premium in 2010. But people I know who are already in Medicare will pay $96.40. This is so unfair! What’s going on?

A. It is unfair. But it’s the result of a situation that has never happened before in Medicare, and although Congress could have acted to correct the problem, it hasn’t done so. Here’s the background:

For the first time in 35 years, there will be no cost-of-living adjustment (COLA) added to Social Security retirement benefits in 2010. That’s because COLAs are pegged to general inflation as determined by the federal consumer price index, and there was no inflation in 2009. Current law says that in years when there is no COLA, standard Part B premiums cannot go up either. So for most people, Part B premiums in 2010 will stay the same as they were in 2009—$96.40 a month.

But this “hold harmless” provision only affects people (about three quarters of the Medicare population) who already have standard Part B premiums deducted from their Social Security checks. Left out in the cold are those who:

  • don’t yet receive Social Security benefits and pay their Part B premiums directly to Medicare.
  • are new to Medicare and have not previously paid Part B premiums.

The problem is made worse by the fact that medical costs are rising even if the cost of other goods and services, as shown in the consumer price index, are not. Under a longtime law, the Part B premium reflects medical costs of the program as a whole. Beneficiaries in general pay 25 percent of those costs and the federal government contributes 75 percent in subsidies.

Rising medical costs normally add a little each year to everybody’s Part B premium. But when the premium for the majority of beneficiaries is frozen, under current law the extra costs must be borne entirely by the remaining minority of about 11 million beneficiaries. (Apart from the categories shown above, these also include low-income people whose Part B premiums are paid by their states and so are not personally affected by the increase.)

When it became known earlier this year that this unprecedented situation would occur for 2010, steps were taken to redress it. In September, the House of Representatives voted overwhelmingly (406 to 18) to make the 2010 standard Part B premium the same for everybody. The bill then went to the Senate where it was expected to pass quickly under a simple voice vote. Instead, it was blocked by an objection from Sen. Tom Coburn, R-Okla. No further action has been taken.

Therefore—without any last-minute intervention by the Senate—the standard Part B premium for people not protected by the “hold harmless” provision will be $110.50 a month in 2010. Premiums for higher-income people—those with a modified adjusted gross income of more than $85,000 (for those filing an individual tax return) or $170,000 (married couples filing jointly)—will range between $154.70 and $353.60 a month.

Patricia Barry is a senior editor at the AARP Bulletin.

Join the Discussion

0 | Add Yours

Please leave your comment below.

You must be logged in to leave a comment.

Next Article

Read This