MEDICARE PART B PREMIUMS

There are several emails going around stating how much "0bamacare" is going to increase Part B premiums. One email says the premium will be $247 per month by 2014.

Rest easy ▬ this email is incorrect.

Medicare Part B premiums are not directly affected by the Affordable Care Act. The premiums are set by two regulations that have been in effect for decades.

The Official Formula

The official formula states that Medicare premiums are to be based on the previous years' Medicare Part B healthcare costs. The federal government (i.e. your taxes) pays 75% of the premium and you pay 25% of the premium. After you pay the premium you are then responsible for an additional 20% of YOUR Part B costs. 

So the 2014 costs, which will be announced in late 2013, will be based on Medicare costs of 2012. This won't be known until 1. we get done with 2012 and 2. the government has time to crunch the figures.

An Even Older Law

Now, another regulation that went into effect prior to the premium formula states that the premium is also tied to the Cost of Living Adjustment (COLA). This regulation affected the premiums in 2010 and 2011 and prohibits a premium increase in any year that there is no Social Security COLA. This held most people's premiums at the 2009 level of $96.40.

However, those who did not have their Part B premium withheld by Social Security and those brand new to Medicare did not benefit from the regulation. In fact, they were hurt because of the fact that most people did not see an increase but healthcare costs did increase. The premium was for 2010 and 2011 was $110.50 and $115.40 respectively. We had a COLA adjustment for 2012 and everyone's premium leveled out to $99.90 (with the exception of those who are high income and pay a surcharged premium).

When will we know?

Medicare generally makes the next year premium announcement in late September or early October so we should know the new amounts soon.

How does the Affordable Care Act affect premiums?

As I said, indirectly. The Act is supposed to lower health care costs. If it does, then Part B premiums will decrease. If not...maybe it won't go up as fast.