Millions of senior citizens will soon find out just how high their Medicare Part B premiums will be in 2018 and whether or not their cost of living increases from Social Security will be able to help offset those adjustments. Unfortunately, many low income seniors may be due for some especially bad news as the board of trustees of Medicare are likely to ask for a premium increase consistent with the expected cost of living adjustment from Social Security, leaving may struggling to better their current situation.
According to reports, the Social Security Administration is poised to increase monthly benefits by 2.2 percent, a raise from an average monthly allowance from $1,360 to $1,390. Although the increase is not dramatic, it is much higher than the miniscule 0.3 cost of living adjustment given last year. Those cost of living increases from the Social Security Administration are important because they have a direct impact on whether or not Medicare can increase premiums.
Under the law, Medicare’s board of trustees cannot allow any premium increases that would effectively decrease the amount of benefits individuals would receive from Social Security. While seniors did not see any increases in their Medicare Part B premiums over the past few years, this was because there was no corresponding increase in Social Security benefits.
With the expected $30 per month increase to Social Security benefits will also come a likely $25 increase in Medicare Part B premiums, which account for approximately 25 percent of the program’s budget. Although the two increases seem to cancel each other out, neither helps low income seniors struggling to make ends meet against rising prices for housing and necessities.
Higher income seniors are likely to see their surcharges, known as Income-Related Monthly Adjustment Amounts (IMRAA), rise as well. There are approximately 3 million Medicare recipients paying these types of surcharges after Congress passed legislation in 2015 lowering the income thresholds.
Income brackets for IMRAA will soon be:
- Bracket One – Incomes of $85,001 to $107,000, 35 percent of premiums
- Bracket Two – Incomes of $107,001 to $133,500, 50 percent of premiums
- Bracket Three – Incomes of $133,501 to $160,000, 65 percent of premiums
- Bracket Four – Incomes more than $160,000, 80 percent of premiums
Whatever the income level, all seniors enrolled in Medicare Part B receiving Social Security benefits need to stay informed of the ebb and flow of benefits versus premiums. Furthermore, those expected to enter retirement soon should also understand how these recent changes could affect their financial outlook as they try to balance financial and health care needs.