Medicare Part B premiums are increasing again for 2017. This is what you need to know to prepare for the increases coming and how your school district should be dealing with Medicare reimbursements in the most efficient way possible going forward.
The Centers for Medicare and Medicaid Services has announced that the standard monthly Part B premiums will increase in 2017. Certain Medicare beneficiaries will pay approximately $109 per month in 2017, which is an increase from the $104.90 per month in 2016. Considering that the adjustment is 0.3% in 2017, only a slight increase will be seen in those Part B premiums. These Medicare beneficiaries are protected by a law called the “hold harmless provision”, which prohibits Social Security benefits from being reduced because of an increase in Medicare premiums. Medicare cost increases are generally covered by the Social Security cost-of-living adjustment (COLA). With that said, most Medicare beneficiaries will not pay this amount because by law the Medicare Part B premiums cannot increase by more than the COLA of social security benefits for current enrollees. These Medicare beneficiaries make up approximately 70% of the Medicare beneficiaries who have their premiums deducted automatically from their Social Security benefits.
The other 30% of Medicare beneficiaries are comprised of Medicare beneficiaries who enroll in Part B for the first time in 2017, who don’t receive Social Security benefits or who are billed directly for their Part B premiums. These beneficiaries will pay a standard monthly part B premium of $134 per month in 2017, up from $121.80 per month in 2016. However, considering that only 30% of Medicare beneficiaries make up this group, most Medicare beneficiaries will not pay this amount. Also, by law, Part B premiums for current enrollees cannot increase by more than the amount of the COLA for social security benefits. The higher premium amount will apply to new enrollees in the program, and certain beneficiaries will continue to pay higher premiums based on their modified adjusted gross income.
*= $109 is the average premium but the rate varies
Source: Centers for Medicare and Medicaid Services
The monthly premiums that include income-related adjustments for 2017 will be $187.50, $267.90, $348.30, or $428.60, depending on the extent to which an individual beneficiary’s modified adjusted gross income exceeds $85,000 (or $170,000 for a married couple). The highest rate applies to beneficiaries whose incomes exceed $214,000 (or $428,000 for a married couple). The rest of the chart can be seen below. The Centers for Medicare & Medicaid Services estimates that less than 5 percent of Medicare beneficiaries pay the larger income-adjusted premiums.
The Social Security Administration (SSA) is responsible for all income-related monthly adjustment amount determinations. To make the determinations, SSA uses the most recent tax return information available from the Internal Revenue Service (IRS). For 2017, that will usually be the beneficiary’s 2015 tax return information. If that information is not available, SSA will use information from the 2014 tax return.
The increases in the premiums, coupled with varied premium rates, adds another level of complexity to preparing the Part B Medicare reimbursements. In the past, schools could use a standard reimbursement amount, and then provide an adjustment for those who had paid more than the standard premium deduction based on Social Security documentation provided by the retiree (otherwise known as Income Related Monthly Adjustment Amount or IRMAA). This process increases risk as manual adjustments need to be made.
Since there is no standard premium rate, schools will need to verify the exact amount of the premium paid by the retiree. Districts should consider reimbursing the Part B premium once a year, and the reimbursement should be based on the actual premium amount paid as indicated on the SSA-1099 form or letter from Social Security.
2017 Medicare Premiums are based on 2015 Income.
This varies based on 2015 filing status:
As internal auditors and accounts payable auditors for many school districts across the Island, we have noted that many districts are reimbursing the Medicare Part B premium two or four times a year, and some perform a separate reimbursement just for those that have paid the IRMAA. Not only does this require time of district staff, the payments have to be reviewed by the accounts payable auditor. Reimbursing on an annual basis can decrease the likelihood of errors, and can increase efficiencies in operations as the process to reimburse is based on actual amounts paid.
Shari Diamond, CIA