2007 Social Security COLA and Medicare Part B Premium Increases
Oct. 18, 2006 at 3:15 PM
by Blogmaster
You veterans who are on Social Security pay attention to this: If you make less than $80,000 income you may not have to worry much, except for the normal rise of your Part B. Some social security recipients will see lower monthly checks in 2007 as a result of two recent changes. Most beneficiaries have their Medicare Part B (doctors' and hospital outpatient) premiums automatically deducted from their Social Security check. Few know that SEC 1839 (f) of the ˇ§Social Security Actˇ¨ protects most Social Security recipients from reduction in benefits when the annual increase in Medicare Part B premium exceeds the Cost-of-Living Adjustment (COLA) dollar amount that a person receives. The law adjusts the premium increase so that benefits don't get cut when the Medicare Part B premium increase is higher than the COLA. That provision of law will have implications for two groups of beneficiaries starting in 2007: „X Enrollees of Medicare Part D prescription drug plans who have their drug plan premiums automatically deducted from their Social Security „X Beneficiaries with annual incomes higher than $80,000 With the implementation of the new Medicare Part D coverage Congress didn't extend this same protection to the Part D drug premiums. If you have new Medicare Part D premiums deducted from your Social Security, any increase in your drug premium (starting 1 January 2007) that is greater than the amount of your COLA increase, will come straight out of your Social Security benefit. You could wind up with a lower Social Security check next year than what you receive now. Also, in 2007 for the first time since Medicare began, the government will determine Medicare Part B premium based on income. The government calls it income relating, or income based premiums. It's also referred to as "means testing." Seniors with annual incomes of $80,000 and more will be affected. These individuals will pay significantly higher premiums than other seniors, and the higher premiums will come right out of Social Security benefits. The special protection that currently prevents Social Security benefits from reduction, will not apply to persons affected by means testing. This change will have the greatest impact on beneficiaries whose Social Security benefits are average or below average, but who have other income that subjects them to the highest Medicare Part B premiums. The government estimates that beneficiaries with incomes of less than $80,000 will pay a monthly premium of at least $93.50 in 2007. This is based on the latest 13 September 2006 estimate of an increase of 5.6% vice 11.2%. Beneficiaries with incomes $80,000 and higher will likely pay a monthly Part B premium that ranges from $106.00 to as much as $162.00. Retirees having incomes higher than $80,000, but with only average Social Security benefits (about $1,002 in 2006), may see reductions in their Social Security starting in January of next year to cover higher Medicare Part B premiums. If Medicare premiums continue to grow at the current annual pace of about 12%, (the average rate of growth since 2002), the impact on the Social Security benefits of persons affected by means testing will grow proportionally. Seniors with incomes of $100,000 a year will see their premiums skyrocket $232.90 or 279% by 2009. For those with incomes of $200,000 or greater the increase to $372.60 will be 320%. Those persons affected will eventually need most of their Social Security check just to cover the Medicare Part B premium. If Medicare premiums become too high beneficiaries may be driven out of the program. The Centers for Medicare and Medicaid Services estimates that some 50,000 seniors may drop their enrollment in Medicare Part B in 2007 alone. There is no guarantee that the $80,000 cutoff will not be lowered in future years making Medicare Part B less and less attractive to seniors. Since only the oldest and sickest will not drop the coverage, in time their medical care requirements will increase, and increase program costs and future premiums, for everyone, no matter what their income.
