Ugly Scenario for 2016 Part B Premiums is a Step Closer

In this earlier post we explained how Part B premiums might need to increase by 52 percent to $159.20 for millions of Seniors if there's no cost of living increase for Social Security in 2016.    This week it was announced that there will indeed be no increase in 2016 Social Security payments.   The rate of inflation is too low, especially with the decline in gas prices.

In years with no Social Security rate increase, a related "hold harmless" provision prevents Medicare from increasing monthly premiums to about 70% of seniors.   The other 30% not protected by the provision - chiefly comprised of new Medicare enrollees and higher income Seniors -- may see their own premiums increase by 52% in order to pay for higher Medicare program expenses.

The Wall Street Journal reports today that, "Officials who oversee the Medicare program at the Department of Health and Human Services are reviewing ways to reduce the increase."

Our Survey on Medicare Awareness Proves that Seniors Know Medicare Very Well

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Plan B Premiums Could Increase by 52 percent for Millions in 2016

According to an article in Kaiser Health News,  Medicare trustees are projecting that 30 percent of seniors will see a 52-percent increase in Part B premiums in January 2016, taking their monthly Part B premiums from $104.90 to $159.30.   The unusually high increase is due to two factors:  the increase in the costs of running the Part B program, and a quirk in the Medicare law.     By law, in a year when seniors see no cost of living increase in their Social Security benefit - as 2016 is expected to be - they may not suffer a Part B premium increase, unless they're new to Medicare (2.8 million people in 2016) or they earn more than $85,000 (3.1 million people) or they don't deduct their Part B premiums directly from Social Security (1.6 million people).    The 7.5 million Part B enrollees who meet one of these three conditions will see premiums leap by 52 percent.    Everyone else will see  premiums remain flat at $104.90.     But 2016 Part B deductibles are also projected to increase by 52 percent from $147/year to $223/year, and that would affect everyone.

If over the next several months Social Security decides on a cost of living adjustment that's greater than zero, these Part B rate increases can be spread over everyone rather than borne by the unlucky 30 percent.



These Ten States have the Highest Percentage of Medicare Enrollees

The percentage of each state's population that was enrolled in Medicare Parts A and/or B in 2013 (latest data available).
Ten States
West Virginia - 21.5% of its population

Maine - 21.3%

Vermont - 19.2%

Arkansas - 19.0%

Pennsylvania - 18.8%

Alabama - 18.6%

Florida - 18.6%

Kentucky 18.4%

Rhode Island - 18.3%

Montana - 18.1%

99.9% of You Can't Correctly Answer These 10 Questions about Social Security

quiz_00005Social Security is pretty easy to understand, right?  This 10-question quiz  - orginally created by the MassMutual Financial Group - suggests otherwise.   Only 1 of 1500 people got it completely right.  72% of people failed it.   (That's according to a story published at Yahoo Money.)     So answer these 10 questions that test your own knowledge of Social Security benefits and see if you can do better than most people do.   Answers are provided at the end.


1. Social Security retirement benefits are based on my earnings history, so I’ll receive the same monthly benefit amount no matter when I start collecting.

2. If my spouse dies, I will continue to receive both my own benefit and my deceased spouse’s benefit.

3. I must be a U.S. citizen to collect Social Security retirement benefits.

4. Under current Social Security law, full retirement age is 65.

5. I can continue working while collecting my full Social Security retirement benefits – regardless of my age.

6. If I file for retirement benefits and have minor dependent children, they also may qualify for Social Security benefits.

7. As a divorced person, I can collect Social Security retirement benefits based on my ex-spouse’s earnings history.

8. Once I start collecting Social Security, my benefit payments will never change.

9. Government workers may have their Social Security retirement benefits reduced.

10. My spouse can qualify for Social Security retirement benefits, even if he or she has no individual earnings history.



1.  False.  If you collect Social Security retirement benefits before reaching full retirement age, you effectively lock in a lower monthly benefit amount. If you wait to begin collecting until after you reach full retirement age, you become eligible for delayed retirement credits. These credits increase your monthly benefit amount by 8% each year that you delay collecting, up to a maximum of 32%. Once you reach age 70, no additional delayed retirement credits accrue.

2.  False.  Social Security retirement benefits are only paid while you are alive. Assuming that you qualify, you would receive the greater of your own benefit or your spouse’s benefit, but not both.

3.  False.  You do not have to be a U.S. citizen to qualify for Social Security retirement benefits. Resident aliens who pay into the Social Security system may qualify to receive retirement benefits, assuming they earn enough credits and meet additional criteria. To become part of the Social Security system, non-U.S. citizens must have lawful alien status, permission by the U.S. Citizenship and Immigration Services (USCIS) to work in the U.S. and a Social Security Number.

4.  False.  Your full retirement age is based on the year you were born. For people born between 1943 and 1954, the full retirement age is 66. If you were born in 1960 or later, the full retirement age is 67. For anyone born between 1955 and 1959, the full retirement age increases gradually.

5.  False.  You can work and receive Social Security retirement benefits. However, if you have not reached full retirement age, your earnings will be subject to the retirement earnings test. If your income exceeds the test limit, Social Security may withhold all or a portion of your benefits. Withheld benefits are repaid over your lifetime once you reach full retirement age.

6.  True.  When you file for Social Security retirement benefits, your children may also qualify to receive benefits based on your record. An eligible child can be your biological child, adopted child or stepchild. A dependent grandchild may also qualify. Normally, benefits stop when children reach age 18 unless they are disabled. However, if the child is still a full-time student at a secondary school at age 18, benefits will continue until the child graduates or until two months after the child becomes age 19, whichever is first.

7.  True. You may be eligible to receive retirement benefits based on your ex-spouse’s earnings record, provided that:

• Your marriage lasted at least 10 years;

• You are currently unmarried;

• You are at least 62 years old; and

• The benefit you would receive based on your personal earnings history is less than the benefit amount you would receive if you filed for benefits based on your ex-spouse’s earnings record.

If your ex-spouse has not yet applied for retirement benefits, but qualifies for them, you can collect benefits based on his or her record provided that you have been divorced for at least two years.

8.  False.  The Social Security Act of 1973 included a provision for cost-of-living adjustments (COLAs) to help Social Security benefits account for inflation. Each year, the Social Security Administration uses specific indexes and formulas mandated by this legislation to determine whether a COLA will apply to benefits paid in the coming year and if so, how much the increase will be. For more detailed information on how COLAs are calculated, visit the Social Security Administration website indicated below.

9.  True.  For certain workers, Social Security imposes two “offsets” that reduce the full Social Security monthly benefits that might otherwise have been paid. The Windfall Elimination Provision (WEP) affects workers who have earned a pension from an employer (such as a government agency) that did not collect Social Security taxes and who also have worked in other jobs long enough to earn Social Security benefits. Under the WEP provision, Social Security uses a modified formula to calculate your benefit, resulting in a lower benefit than you might otherwise have received. The second offset, called the Government Pension Offset (GPO), affects a spouse’s benefit based on your earnings. The GPO can reduce spousal benefits to $0.

10.  True.  Many spouses choose to stay at home to raise children or otherwise spend extended periods of time outside the paid workforce. This can affect a spouse’s ability to qualify for Social Security benefits. In such cases, the spouse who earns less may be eligible for a Social Security spousal benefit. A spousal benefit can be as much as 50% of the higher earning spouse’s full retirement age benefit. The exact percentage will depend on whether or not each spouse has reached his or her full retirement age.

Medicare Blood Deductible and Blood Transfusion Benefit - What is it Worth?

If you are shopping for a Medicare Supplement Plan you might notice that all of them offer coverage - in whole or in part - for blood transfusions.   That’s because Medicare Part A provides coverage for blood transfusions only after your third unit of of blood in any calendar year.   So your first three units of blood in any given year are at your expense.
Cost of Pint of BloodIt’s not uncommon to require blood transfusions in the course of a surgery or if you have a bleeding disorder or one of the various cancers of the blood.   While hospitals cannot charge for blood itself, their collection, storage, handling and infusion charges routinely add up to $1500 or more per unit (Pint) that you need.   So when you contemplate the value of the blood transfusion benefit offered in the Medigap plans, it’s fair to regard that as a benefit worth $4500 or more if you ever find yourself needing a blood transfusion.

Plan F or G? Look Closely and You Might Choose G

Medicare Supplement Plan F has become by far the most popular Supplemental plan of all, chosen by over 50 percent of plan holders.   It offers the longest list of benefits of all the Medigap plans and includes coverage of the Part B Deductible (which is $147 in 2015) and coverage for Medicare Excess Charges.

Medigap F plan G plan

But Plan G is often less expensive than Plan F, and it offers precisely the same benefits as Plan F, except for the Part B deductible benefit (see accompanying table). That’s the only distinction between the two plan types and the benefit is worth at most $147 per year.

So if you can find a Plan G with annual premium that $147/year less than a Plan F, you should choose the Plan G and pocket the savings.

It shouldn’t be hard to find one:  Looking at a June, 2015 database of Medicare Supplement rates in Indiana, there’s a Plan F offered by Colonial Penn that costs $3117.27 annually for a 65-year old non-smoking female.   That same buyer could buy Plan G from Colonial Penn for $2173.62, saving $943.64 per year in premiums -- more than enough to pay for the $147.00 Part B deductible.

MedicareConsumer Tip:   If you’re attracted to the long list of benefits available from Medicare Supplement Plan F, ask your agent to also quote you a Plan G option. As long as the Plan G option is cheaper by at least $147/year, you should take it.

Medicare Supplement Plan BenefitPlan FPlan G

Pays Part A co-insurance for up to 365 days of additional hospital stay after Medicare benefits are exhausted



Pays Part B preventative care co-insurance



Pays Part B co-payment or co-insurance



Pays for the first three pints of inpatient blood per year that Medicare Part A doesn’t pay for



Pays the Part A co-pay/co-insurance for hospice care



Pays the Part A deductible



Pays for the skilled nursing care co-pay that Part A charges after 21 days



Pays for foreign travel emergency

Up to 80%

Up to 80%

Pays the Part B deductible



Pays for Part B “Excess Charges”