Legal Glitch Could Affect Your Medicare Premiums

August 7, 2015

Nearly one-third of Medicare beneficiaries could see a 50-percent rise in Medicare Part B premiums next year. The legal provision in place to protect beneficiaries from premium increases higher than cost-of-living adjustments (COLA), inadvertently excludes this group.

How this works:

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which is used to calculate the COLA for Social Security, veteran and survivor benefits, and military and federal retiree pay, currently remains at minus 0.2 percent for the first three quarters of the fiscal year.

The average CPI-W for the current quarter (July through September) will determine whether there will be a 2016 COLA increase. 

If there isn't a COLA increase, the “hold harmless” provision takes effect. This provision prohibits premium increases higher than COLA.

According to the Centers for Medicare and Medicaid Services, “approximately 70 percent of beneficiaries are expected not to see a premium increase in 2016.” 

However, because of a glitch in the law, 30 percent of beneficiaries are not protected by the hold harmless provision and would see a steep Part B premium increase. This group includes those who enter the Medicare system next year; those who pay their Medicare premiums directly instead of having them deducted through Social Security; or those who are making at least $85,000 for an individual and $170,000 for a married couple. 

Federal retirees who retired under the older Civil Service Retirement System (CSRS) are a large portion of those who may be affected. Under CSRS, there is no Social Security benefit and Medicare premiums are paid directly. Although many federal retirees are now under the newer Federal Employees Retirement System, most federal workers who began civil service prior to Jan. 1, 1987, fall under CSRS.

A similar scenario took place in 2010 and 2011, which was the last time COLA did not increase. During that time, there was some congressional movement to protect the individuals who were not covered by the hold harmless provision, but Congress did not end up passing any legislation. 

MOAA is looking for a congressional champion to prevent this from happening again.