Answers to questions about Medicare
Q: I just received my first Medicare Part B bill of the year, and my monthly premium is $115.40, rather than the $96.40 that most people are paying.
Why am I paying so much more than everyone else? I don’t earn enough to be hit by the high-income surcharge, and I’ve been covered by Medicare for several years. I’m 68, but I haven’t started collecting Social Security benefits.
A: You are correct: Most people are still paying $96.40 per month for Medicare Part B benefits, which cover doctors’ visits and outpatient care. That’s because the majority of Medicare beneficiaries are protected by the so-called hold-harmless provision, which prohibits their Social Security benefits from going down in any year.
Here’s how it works: There was no cost-of-living adjustment in Social Security benefits for 2011 because inflation has been so low. Because most people have their monthly Medicare premiums deducted from their Social Security check, applying the increase in Medicare Part B premiums would have resulted in a reduced benefit.
Therefore, most existing Medicare beneficiaries are exempt from the premium increase. But because you do not yet collect Social Security benefits, you’re not protected by the hold-harmless provision and you have to pay the increased premium for Medicare Part B.
There are other exceptions. People who enroll in Medicare Part B for the first time in 2011 are not protected by the hold-harmless provision because they have not received Medicare benefits in the past.
Likewise, retirees who aren’t part of the Social Security system — for example, some former public-sector employees — are not protected by the hold-harmless provision. Both groups must pay the $115.40 monthly premium.
A few other groups will also pay more than $96.40 a month for Part B. Retirees who enrolled in 2010 will pay $110.50 per month, which is the same premium that they paid last year.
And individuals with modified adjusted gross income of $85,000 or more (or $170,000 or more if married filing jointly) will pay a high-income surcharge on both their Part B and their Part D premiums.
For more information about who pays what Medicare premiums in 2011, see the Kiplinger article “How Much You’ll Pay for Medicare in 2011” at http://bitly.com/ MedicareCosts.
Q. What is expected to happen to Medicare and Social Security premiums in 2012?
A. Millions of retired and disabled people in the United States had better brace for another year with no increase in Social Security payments.
The government is projecting a slight upward cost-of-living adjustment for Social Security benefits next year, the first increase since 2009.
But for beneficiaries whose Medicare premiums are deducted from their Social Security, the increased cost of Medicare is expected to wipe out any increase in Social Security benefits, leaving them without a raise for a third straight year.
As explained above, when Medicare premiums rise and Social Security benefits don’t, most beneficiaries don’t see their benefit check go down because of the hold-harmless provision. But even in years when Social Security payments rise, if Medicare premiums rise as much or more, beneficiaries won’t see their checks go up, either.
David Certner of AARP estimates that as many as three-fourths of beneficiaries will have their entire Social Security increase swallowed by rising Medicare premiums next year.
Q: How does Medicare Part D’s new 50 percent discount on brand-name prescription drugs work for seniors affected by the so-called doughnut hole? Doesn’t it just mean that we end up in the doughnut hole for longer?
A: The prescription-drug coverage gap, known as the doughnut hole, has been the big downside of the Medicare Part D program since it was launched in 2006.
But beginning in 2011, the gap will start to shrink. Once your total drug costs reach $2,840 for the year (including your share and the insurer’s share of the costs), you will get a 50 percent discount on your brand-name drugs.
Your pharmacy will apply the discount automatically when you purchase the medications. After your out-of-pocket costs reach $4,550 for the year, you qualify for catastrophic coverage and your Part D plan picks up most of the tab.
As you mention, this discount would have merely left you in the doughnut hole longer if they hadn’t changed the way the doughnut hole is calculated, too.
To avoid this problem, the entire cost of the drug — before the 50 percent discount is applied — counts toward the amount needed to fill the coverage gap. If the drug costs $100, for example, and you pay $50, the entire $100 will count toward your out-of-pocket costs that trigger catastrophic coverage.
The discount comes off the price that the Part D plan has negotiated with the pharmacy for that specific drug, said Jim Turner of Humana. The dispensing fee (often $2 to $5) isn’t discounted, but it is added to the discounted amount of the prescription and does count toward the $4,550 in out-of-pocket costs.
Also starting this year, you’ll only pay 93 percent of the cost of generic drugs, with the government picking up the remaining 7 percent. But in this case, only the 93 percent of the cost that you pay yourself counts toward leaving the doughnut hole.
© 2011 Kiplinger. All rights reserved. Distributed by Tribune Media Services, Inc. The Associated Press also contributed to this article.