UPDATE: The U.S. Senate passed this bill after midnight Thursday night/ Friday morning, and it’s on its way to Pres. Barack Obama’s desk, where he is expected to sign it.
By Rose Hoban
About 109,000 North Carolinians turn 65 next year and will be eligible for Medicare, the program providing health care coverage for seniors.
But many new Medicare recipients are going to be in for a big financial surprise, courtesy of low inflation.
That’s because Medicare recipients pay a premium for Medicare Part B, the portion of the plan that pays for doctor and outpatient care. Since 2014, that premium has been $104.90 per month, said Gina Upchurch, leader of Durham’s Senior Pharm Assist, a program that helps seniors access medications.
“When we see people who are new to Medicare, they’re often shocked at how much cost sharing is involved,” she said.
Upchurch also explained that federal law requires that the premiums paid by seniors across the U.S. for Medicare Part B go towards paying for the program; so, as program costs go up, the premiums paid by seniors also tick up.
But if inflation is low, and there is no cost-of-living adjustment for people on Social Security, a different federal law prohibits raising that rate.
This year, there’s no Social Security cost-of-living adjustment and the cost of providing Medicare Part B has increased, putting those two federal laws in conflict.
So how will federal accountants reconcile the budget gap that’s opened?
New Medicare recipients.
Happy Birthday! Now pay up!
People who turn 65 in 2016 will have to bear the brunt of the difference between what Medicare Part B needs and what’s available from current recipients’ premiums, paying about 50 percent more for their premiums. Others who will be paying higher premiums are those who have high incomes: more than $85,000 per year for a single person and $170,000 for a couple.
Since 65-year-olds haven’t paid a premium before, their birthday present will be that their collective premiums will have to cover the difference between what current recipients pay and last year’s bills.
When it’s all said and done, newly eligible Medicare recipients will be staring down premiums that are estimated to be around $159. That’s a cool $650 more per year than their brothers and sisters born before 1951 will be paying. Those folks’ premiums will stay at the $104.90.
Turns out that’s a bitter pill for many seniors to swallow – in particular, the low-income folks who make up the bulk of retirees.
“When we put $30 back into someone’s Social Security check, it’s meaningful when you live to such a strict budget,” said Carla Obiol, senior deputy commissioner at the N.C. Department of Insurance. Obiol has been involved in the Seniors’ Health Insurance Information Program since it’s inception in the 1980s.
Obiol said that extra $40 could be the amount a senior sets aside for groceries for a week, or medicines.
“They’re retired, they’re not working, there’s no new money coming in,” she said. “They have a set amount of money. And people are living longer, so that nest egg has to be stretched out.”
Congress has said it wants to do something about fixing the problem. A proposed budget agreement passed out of the U.S. House of Representatives on Wednesday would cap the premium increase at $120 per month.[box style=”0″]
How did N.C. lawmakers vote on the budget bill?
Yeas: Pittinger, Butterfield, Price, Adams, McHenry, Walker, Rouzer
Noes: Ellmers, Foxx, Holding, Jones, Meadows
Not voting: Hudson
Because Medicare statutes require that the program be solvent, capping premiums would require Medicare to take a loan from the federal government’s general fund.
But that will need to be paid back, in the form of higher premiums for all Medicare beneficiaries.
“The cost of limiting the increases in 2016 will be paid for by a loan of general revenue from the Federal Treasury to the Part B Trust Fund,” read a press release from the D.C.-based Center for Medicare Advocacy. “Medicare beneficiaries will pay back the loan over time from set increases to future premiums.”
Medicare: Not as cheap as you think
There’s a lot of small print in the Medicare program, which means seniors pay quite a tidy sum for their “free” health insurance.
Under traditional Medicare Part A, which covers hospitalization costs, the government pays 80 percent of all those bills. So seniors are on the hook for 20 percent of increasingly expensive hospital care, unless they purchase so-called “Medi-gap” insurance policies.
Those policies can cost a couple thousand dollars a year, and can include deductibles.
Medicare Part B, the subject of this story, pays for doctors and outpatient visits. If your individual income is below $85,000 per year, your premium is $1,258 per year.
Part B also includes deductibles, but the deductible for this year hasn’t been determined yet because of the confusion over premiums.
“It currently is $147 and likely to go up,” said Senior Pharm Assist’s Upchurch. “That is not kept in check just because [there’s] no Social Security cost-of-living allowance.”
Medicare drug insurance, called Medicare Part D, requires seniors to purchase separate insurance policies for pharmaceutical coverage. Premiums for that coverage in North Carolina range between $18.40 and $120.50 per month. That cost doesn’t include deductibles and changes in coverage that kick in when beneficiaries hit the infamous “donut hole” of coverage.
According to Upchurch, the Affordable Care Act will phase out the donut hole, reducing confusion somewhat.
“I can’t wait for that, when its easier to explain!” she said.
Finally, a senior can opt into a more all-encompassing Medicare Advantage plan, where private insurers cover all of a senior’s medical needs for one monthly premium. But those aren’t free either. Prices for those plans range all over the map, literally: Every one of North Carolina’s 100 counties has different plans, offered by different insurers, at different prices.
One thing to know: If a senior is low-income, they’re eligible for assistance from the federal government to help pay their premiums and deductibles.