National Council on Teacher Retirement: Medicare Part B Premium Increase Update

November 4, 2015

The below blog is from the National Council on Teacher Retirement "Medicare Part B Premium Increase Update."

First, the bad news: Medicare Part B premiums for many, but not all, retired teachers and other public employees will still increase in 2016, despite recent action by the Congress that was signed into law by the President on November 2, 2015.  The standard premium for those enrollees who pay their premiums directly to Medicare, and who are therefore not covered by the so-called “hold-harmless” provision, will increase to $120.70 in 2016, PLUS an additional surcharge of $3, for a grand total of $123.70 per month.  For the vast majority of Medicare Part B enrollees whose standard Part B premium is already taken out of a Social Security check, the standard premium will NOT increase at all—remaining $104.90 per month—and they willNOT be subject to the monthly $3 surcharge, which will apply for the next five years.

Now the good news:  The 2016 standard premium increase for the approximately one in seven Medicare beneficiaries who will be affected, including millions of public employees who are not covered by Social Security, will NOT increase by 52 percent to $159.30, as originally scheduled.  Instead, the 2016 increase (including the $3 surcharge) will be an 18 percent hike.  Of course, as Michael Wald, an independent economics analyst and writer, points out in a recent post on FedSmith.com, this increase is far above the current rate of inflation and comes without any offsetting increase in Social Security.  Furthermore, for many Federal retirees who are subject to the increase, there will not be any cost-of-living-adjustment (COLA) in 2016; the same is also true for many affected public employees who will also not see an increase in their retirement benefits in 2016.

Briefly, by way of background, Federal law protects the vast majority of Medicare Part B enrollees who receive a Social Security benefit from increases in their Medicare Part B premiums in years when no Social Security COLA is granted, such as will be the case in 2016.  However, seniors who have high incomes, seniors who have low enough incomes that they are also covered by Medicaid—in which case the state picks up the tab—and seniors who are not enrolled in Social Security—including many teachers—must absorb the premium increases scheduled for ALL beneficiaries.

The recent changes in law to address this originally-scheduled premium increase were included in the two-year budget deal reached between the bipartisan Congressional leadership and President Obama the week of October 21st.  The package would suspend the limit on Federal borrowing until March 16, 2017, raise Federal spending levels above the 2011 Budget Control Act, and increase funding by $80 billion through September 2017—thus avoiding a possible government shut-down later this year.

The legislation—H.R. 1314, the “Bipartisan Budget Act of 2015”—was passed early last Friday morning, October 30th (around 3:00 AM), by a 64–35 vote in the Senate, which followed House approval by a vote of 266–167, including the support of 79 Republicans, on October 28th.

In addition to keeping the premium hike to the amount that all enrollees would have paid in 2016, but for the “hold-harmless” provision, the amendments impose a $3 surcharge, as noted previously, which will be in effect for five years, designed to help offset the $7 billion loan from the Treasury Department that permits the lower 2016 premium for those who are not protected by the “hold-harmless.”

“I am pleased that our national leaders were able to find a way to quickly address this very serious matter,” said Meredith Williams, NCTR’s Executive Director.

On October 27th, NCTR and four other national organizations—the National Conference on Public Employee Retirement Systems (NCPERS), the National Education Association (NEA), the National Association of State Retirement Administrators (NASRA), and the American Federation of Teachers (AFT)—sent a letter to President Obama and the Congressional leadership urging them to do all in their power to find a solution as soon as was possible to block the dramatic increase in the Medicare Part B premium scheduled to take effect for millions of public sector retirees in 2016.  The letter stressed that these higher costs “could literally mean a choice between health and hunger” for many of the “oldest and most vulnerable public sector retirees.”

“I would have preferred to see no increase at all in their 2016 Medicare Part B premiums for our millions of retired teachers,” he continued, “but I find myself agreeing with others who point out that, all things considered, we were pretty lucky to have had anything included in this last-minute budget deal.”

Williams was referring to a comment by Richard Thissen, president of the National Active and Retired Federal Employees Association (NARFE), which has many members who also are not covered by existing law’s “hold-harmless” provision.  Thissen was quoted as saying that the fix in the budget deal “may not be perfect, but in a deeply polarized Congress, to have achieved a bipartisan compromise is a major victory.”

“I wouldn’t disagree,” observed Williams, who also noted that when similar, if less dramatic, increases were presented in 2010 and 2011, when Social Security COLAs were not provided, Congress failed to stop the premium hikes for those ineligible for the “hold-harmless.”

• R. 1314, “The Bipartisan Budget Act of 2015”—see Section 601
• FedSmith.com: “Who Wins and Who Loses From The Proposed Legislation For Medicare Part B Premiums?”

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