| The Medicare Part B premium increase for 2021 will not be as large as government actuaries predicted because of a new provision in the spending law that keeps the federal government running until Dec. 11.
The monthly premiums for Part B — which helps pay for doctor visits, diagnostic tests and other outpatient services — are determined based on Medicare's overall program costs and other health insurance factors. As the actuaries for the Centers for Medicare and Medicaid Services (CMS) began running the numbers earlier this year, lawmakers and advocates like AARP learned that the data indicated that the 2021 Part B premium could increase by as much as $50 a month for some beneficiaries.
Over the past decade, the Part B monthly premiums sometimes stayed the same year-to-year, sometimes increased modestly or significantly, and actually even went down one year. In 2011, the Part B premium was $115.40 and by 2020 it had grown to $144.60. So a monthly increase between $25 and $50 in just one year would have been unusual — and difficult for many recipients to afford.
The larger-than-usual Part B premium increase was projected because of the increased emergency Medicare spending resulting from the COVID-19 pandemic. In addition to the health care costs to treat the coronavirus, the federal government also has been paying doctors and other Part B providers to offset the money those providers have lost because many Medicare enrollees have postponed some routine and preventive care during the crisis.
To offset this emergency spending and avoid a large premium increase, Congress in the new budget law added enough money to Medicare so, according to a spokesman for House Speaker Nancy Pelosi, the Part B premium will increase only by an estimated $4 a month. CMS officials are expected to announce the new premiums and deductibles for Original Medicare in the next few weeks. Open enrollment for Medicare starts on Oct. 15 and runs through Dec. 7.
The annual Part B premium increase is especially important for the majority of Medicare enrollees who also receive Social Security benefits. Of the more than 62 million Medicare beneficiaries, nearly 44 million have their premiums deducted directly from their monthly Social Security benefit. Under a federal “hold harmless” law, recipients will have to pay the portion of the Part B premium increase that doesn't result in their receiving a lower Social Security monthly payment. A large Part B premium increase would likely have eaten up whatever cost-of-living adjustment (COLA) the Social Security Administration sets for 2021.
SSA announced that the 2021 COLA will be 1.3 percent, an average increase to monthly retirement benefit of about $20, beginning in January.
If the estimate of a $4 Part B premium increase is correct, Social Security recipients will see at least some of the expected COLA increase.
"This much-needed action will keep more money in seniors’ pockets, and will be especially helpful to those struggling to meet their daily expenses during this pandemic,” said David Certner, AARP’s director of legislative policy.
Editor’s note: This article has been updated to reflect information about the 2021 COLA.