Rising Medicare Part B premiums in 2022
As of January 1, 2022, all Medicare beneficiaries will pay higher Part B premiums, and those with higher incomes will pay higher surcharges as well. These increases were announced in November by the Centers for Medicare and Medicaid Services (CMS). They are the largest annual increases in recent history.
The standard Medicare Part B premium has risen from $148.50 to $170.10 per month. Part B covers doctors’ visits and other outpatient services.
According to CMS, the increase is due to the rising prices and increased utilization of services across the healthcare system during the pandemic, as well as anticipated intensity of care to be provided this year.
CMS also indicated that Medicare needs to build contingency reserves because of the uncertainty regarding the potential use of the Alzheimer’s drug Aduhelm by people with Medicare. [Note: Shortly before press, the makers of Aduhelm announced plans to cut its annual cost in half to encourage wider usage.]
By law, Part B monthly premiums must be set to fund 25% of the estimated total Part B costs for enrollees 65 and older. In addition, the program must maintain adequate reserves in case costs are higher than anticipated.
“CMS is committed to ensuring high quality care and affordable coverage for those who rely on Medicare today, while protecting Medicare sustainability for future generations.” said CMS Administrator Chiquita Brooks-LaSure.
“The increase in the Part B premium for 2022 is continued evidence that the rising drug prices threaten the affordability and sustainability of the Medicare program.”
How much will you be charged?
High-income surcharges for 2022 are based on income reported on your 2020 tax return. There is always a two-year gap in time from between your tax return and the possible high-income surcharge, also known as income-related monthly adjustment amount (or IRMAA).
In 2022, individuals with modified adjusted gross income (MAGI) of $91,000 or more, and married couples with MAGI of $182,000 or more, will pay a surcharge ranging from $68 to $408 per month, depending on income. Tables for the surcharges can be found at bit.ly/sssurcharges. If both spouses are covered by Medicare, the premiums and surcharges are charged to each of them.
If you are subject to high-income surcharges on Part B premiums, you will also be subject to monthly surcharges on your prescription-drug plans. The additional surcharge ranges from $12.40 per month to $77.90 per month.
Social Security has also increased
In November, the Social Security Administration also announced the largest COLA adjustment to benefits in recent years, 5.9%. The average benefit for a retired worker will increase by $92 a month in 2022, and the average benefit for a couple will increase by $144 a month.
Accordingly, the increase in benefits for most Social Security participants will be greater than the increase in Part B Medicare premiums.
However, according to the Senior Citizens League, the Medicare B price increases will essentially cancel out the COLA adjustment of Social Security recipients with the lowest benefits.
Part B premiums have ranked as one of the fastest-growing costs that older retirees face in retirement. It is not likely that will change in the near future.
Many retirees are considering Roth conversions [which involves paying tax now on IRA funds to convert them to tax-free Roth funds]. It is important that retirees who are considering this consider doing the conversion gradually in order to avoid large increases in MAGI that can lead to large Medicare surcharges two years later.
© 2021 Elliot Raphaelson. Distributed by Tribune Content Agency, LLC.