Medicare Part B Premiums Rises by Surprise, What Should You Know?

A 14.5% increase in Medicare Part B premiums was announced by the Centers for Medicare and Medicaid Services (CMS).

If you don’t fully remember, Medicare is divided into two parts.

Part A, Hospital Insurance (HI), covers hospitalization, skilled nursing facilities, home health care, and hospice services.

2.9% of Payroll taxes, which are shared equally by employers and employees, are the primary source of funding for HI.

The other part is Supplementary Medical Insurance (SMI) which is a larger account that covers outpatient hospital and physician services, as well as prescription drugs.

It is organized into two separate accounts; Part B, which provides coverage for outpatient hospital services and physicians’ services, and Part D, which provides coverage for prescription drugs.

Participant premiums and general revenues are used to finance SMI. It is estimated that part B will cost 25% of the projected program cost.

The 2021 Part B premium is expected to increase from $148.50 to $170.10, an increase of 14.5% for an individual with an income below $91,000.

In addition to the increase in Medicare premiums, individuals with incomes between $170,000 and $500,000 will see their premiums rise from $475.20 to $544.30 (See Table 1).

In the past year, healthcare costs grew only by 0.4% (see Figure 1 below). The increase has also exceeded the CMS Trustees’ prediction in August of 6.7% by a significant margin.

According to the report, there were three factors contributing to the increase, two fairly routine and one horrifying. These are routine factors area:

1) projected rising prices and increases in the intensity of care;

2) making up for a cap in Part B premium increases in 2020.

Aduhelm, a new Alzheimer’s drug estimated to cost $56,000 a year, is the horrifying cause of the increase in pricing.

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While Medicare’s coverage of Aduhelm is still being determined, CMS increased its “contingency reserves” to cover possibly higher spending in the future.

Apart from that, it is because Aduhelm is administered in physicians’ offices rather than purchased at pharmacies is why it falls under Part B rather than Part D.

Being under Part B has the consequence of requiring traditional enrollees to cover 20% of the cost of Part B medication, which would amount to approximately $11,200 in out-of-pocket costs for patients prescribed Aduhelm.

After paying the increased premiums, what will Social Security beneficiaries be left with? Let take an illustration for that answer. Take for example, a retiree currently receiving $1,600 a month will see their benefits rise by $94 per month, but will have to pay an additional $22 in Medicare premiums, meaning their benefits will rise by a net of $72, or 4.5%. Thus, despite not eliminating the COLA, it extremely impacts its inflation protection.

Aduhelm’s coverage could unleash a spiral of Medicare costs and premium increases that would overwhelm Social Security COLAs subsequently, reducing the purchasing power of benefits.

Press accounts suggest that Aduhelm might not even be particularly effective.

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