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 Department of Labor's Consumer Price Index (CPI) means there will be a small increase in Social Security benefits. Medicare Part B premiums will rise by about the same amount for most recipients. However, for about 30 percent of recipients, those who aren't covered by the "hold harmless" provision, the Medicare Part B premium increase could be more significant.
These changes, along with several others to Medicare Part A and B, will go into effect soon. You should start considering how they could affect your budget next year.
A COLA adjustment will slightly increase your Social Security benefits. Since 1975, Social Security benefits have an automatic cost-of-living adjustment (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 .3 percent adjustment for next year. Meaning, you'll get an additional $3 per $1,000 you receive in benefits starting December 30, 2016.
The estimated average monthly benefit for all retired workers is expected to increase $5, from $1,355 to $1,360.
Medicare Part B premiums will rise, but you might not have to worry. The COLA also affects Medicare Part B premiums, the part of Medicare that covers some types of procedures and medical equipment, including some doctor visits, lab work, physical therapy and preventative services
For about 70 percent of Medicare recipients, the Social Security Act's "hold harmless" provision prohibits an increase to Medicare B premiums of more than the previous year's COLA adjustment.
According to the Centers for Medicare and Medicaid Services, held harmless recipients will pay $109 per month for Part B premiums in 2017.
That's an increase of $4.10 from last year's $104.90, and could be more than offset by the increase in Social Security benefits.
If you aren't held harmless, Part B premiums could increase by about 10 percent. The remaining 30 percent of Social Security beneficiaries, those who aren't held harmless, will have to deal with a larger approximately 10-percent increase. While the increase could strain your budget, particularly if you're on a fixed income, luckily it's lower than the 22 percent increase Medicare trustees projected in June.
You could fall into the non-held-harmless group and have a significant change in your monthly bill if you:
• Are a new enrollee
• Enrolled in Medicare but don't receive Social Security benefits
• Get billed directly for Medicare Part B
• Receive Medicare and Medicaid benefits and your state Medicaid programs pay your Part B premium
• Are a high-income earner subject to an income-adjusted premium
For the non-held-harmless group, the premium depends on the recipient's (or couple's when filing a joint tax return) income.
• The least expensive monthly premium applies to individuals who have an adjusted gross income (AGI) of $85,000 or less ($170,000 for couples). For this group, the standard monthly premium will increase from $121.80 to $134 a month per person.
• On the high end, for recipients with an AGI over $214,000 ($428,000 for couples), the monthly premium will increase from $389.80 to $428.60 per person.
Medicare Part A and B deductibles will also increase next year. Most people don't have to pay Medicare Part A premiums, but you may have to pay the deductible or coinsurance for inpatient hospital coverage or skilled nursing facility care that Part A covers.
• The deductible for inpatient hospital coverage will increase from $1,288 to $1,316 per benefit period in 2017. The deductible helps cover the first 60 days of care.
• Daily coinsurance for the 61st through 90th day of treatment will increase from $322 to $329.
• Daily coinsurance for day 91 on 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 day 21 to 100 of skilled nursing care will increase to $164.50.
• 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 percent of Medicare-approved costs for services covered by Part B.
Bottom line: A COLA will change Social Security benefits and increase Medicare Part B premiums. Most people with Medicare Part B won't have to budget for the increase, but the 30 percent who aren't "held harmless" could see significant increases in premiums. In either case, you may need to prepare for changes in Part A and B deductibles and coinsurance. Try to take steps now to understand which changes could affect you and alter your budget accordingly.
Nathaniel Sillin directs Visa's financial education programs. To follow Practical Money Skills on Twitter: www.twitter.com/PracticalMoney
This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.
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