Practical money matters by Nathaniel Sillin
IF YOU’RE eligible for Medicare or will be in the coming year, there are a few changes you should know about for 2017.
An increase in the federal labor department’s consumer price index, or CPI, means there’ll be an increase in social-security benefits and Medicare part-B premiums. For most recipients, the increases almost offset each other but people who aren’t covered by the “hold harmless” provision – about 30 per cent of recipients – face a larger part-B premium increase.
These changes, along with several others, will go into effect soon and you should consider how they could affect your budget.
Social-security benefits. Since 1975, social-security benefits have had an automatic annual cost-of-living adjustment, known as COLA. The adjustment depends on the CPI and helps keep your benefits in line with the rising cost of goods.
There wasn’t a COLA for 2016 benefits but there is a 0.3 per cent adjustment for next year. That means you’ll get an additional $3 per $1,000 that you receive in benefits. The estimated average monthly benefit for all retired workers is expected to increase by $5, from $1,355 to $1,360.
Medicare part-B premiums. These will also rise. COLA also affects part-B premiums, the part of Medicare that covers some types of procedures and medical equipment. However, for about 70 per cent of Medicare recipients, the Social Security act’s “hold harmless” provision prohibits an increase to Medicare part-B premiums of more than the previous year’s COLA adjustment.
According to the agency responsible for Medicare and Medicaid services, held-harmless recipients will pay $109 per month in part-B premiums, an increase of $4.10.
The remaining 30 per cent of social-security beneficiaries will have their part-B premium increase by about 10 per cent.
You could fall into the non-held-harmless group if you are a new enrollee, are enrolled in Medicare but don’t receive social-security benefits, are billed directly for your Medicare part-B premium, receive Medicare and Medicaid benefits and your state Medicaid programs pay your part-B premium or you are a high-income earner subject to an income-adjusted premium.
For the non-held-harmless group, the premium depends on the recipient’s adjusted gross income, known as AGI, or the joint AGI for couples who file a joint tax return.
The lowest monthly premium – for individuals who have an AGI of $85,000 or less, or $170,000 for couples – will increase from $121.80 to $134 a month per person.
On the high end, for recipients with an AGI of more than $214,000, or $428,000 for couples, the monthly premium will increase from $389.80 to $428.60 per person.
Medicare part-A and part-B deductibles. These will also increase. Most people don’t have to pay Medicare part-A premiums but you could still have to pay a deductible or coinsurance for some part-A benefits.
The deductible for inpatient hospital coverage, which helps cover the first 60 days of care, will increase from $1,288 to $1,316 per benefit period.
Daily coinsurance for the 61st to 90th days of treatment will increase from $322 to $329.
Daily coinsurance for days 91 and beyond will rise from $644 to $658.
Each day past day 90 counts towards your lifetime reserve. You have a maximum of 60 lifetime reserve days; after which you could be responsible for all costs.
Skilled nursing facility care is completely covered for your first 20 days. Daily coinsurance for days 21 to 100 of skilled nursing care will increase to $164.50 and you could be responsible for all costs beyond day 100.
The part -B annual deductible will also increase, from $166 to $183. Generally, after you’ve met your deductible, you’ll pay 20 per cent of Medicare-approved costs for services covered by part B.
Bottom line: Social-security benefits, Medicare part-B premiums and part-A and part-B deductibles and coinsurance will increase in 2017. Whether you’re held harmless or not, take steps to understand which changes could affect you and alter your budget accordingly.
Nathaniel Sillin directs Visa’s Practical Money Skills For Life financial education programs. Follow him on Twitter at twitter.com/PracticalMoney. His articles are intended to provide general information and should not be considered legal, tax or financial advice. Always consult a tax or financial adviser for information on how the law applies to your individual financial circumstances.