More Medicare Updates

Let me start with an apology — in the past I have apologized for the use of acronyms in my columns — today will be a little different. Today I will apologize for the use of numbers and figures. At heart I am a bookkeeper and nothing gives me more pleasure than trying to make sense out of random facts and figures.

In the past two weeks, Social Security and Medicare have announced benefit levels for the year 2012.

As many of you are only too painfully aware, Social Security has not allowed a cost of living increase for the past two years. Federal law also said that a person could not receive fewer benefits than previous years because of Medicare Part B premiums increases.

So in effect, a person’s Part B premiums of $96.40 have remained the same since 2009. This is only true for people who already were on Medicare in 2009. Folks who became eligible for Medicare in 2010 and 2011 were subjected to higher Part B premiums. In 2011, it was $115.40 or about 20 percent higher than those whose premiums were frozen at the 2009 level.

So that is the background and the stage is set.

Two weeks ago it was released that Social Security benefits would increase by 3.6 percent for 2012. This would amount to an average increase of $38 per month.

Seniors were dancing in the streets and were overjoyed at the generosity of the increase … not really. But they were guardedly optimistic that their benefit increase would not be devoured entirely by the forthcoming Medicare Part B premium announcement for 2012.

Every year we have to wait approximately one week between the Social Security benefit announcement and the Medicare benefit announcement.

During that week, as I talked with other professionals and read numerous blogs and listened to pundits on TV, the consensus was that Medicare would not increase Part B premiums from the 2009 level of $96.40 to the 2011 level of $115.40 in one fell swoop, but rather stagger it over a two-year period.

Last week Medicare announced the plan design and premiums for 2012. Drum roll, Maestro …

Part B premiums will be increasing by 3.5 percent to $99.90, for all Medicare beneficiaries. The majority of beneficiaries will see a very modest increase in the Part B premiums, but those people who entered Medicare in 2010 and 2011 will see a decrease, from the $110 or $115 to the 2012 standard of $99.90.

In addition, the Medicare Part B deductible will decrease from $162 in 2011 to $140 in 2012, a decrease of $22 annually or close to 14 percent.

In the press release announcing these figures, a CMS (Medicare) administrator said, “Health care reform passed last year helped limit costs.”

The cynic in me wants to say this is a blatant case of pandering to the electorate by politicians. However, after further thought, it actually may be true.

To my rough estimation it appears as if the four following items when combined would be close to revenue neutral, meaning no tax break or tax increase. These four items are the modest increase of Part B premiums for most people; the large decrease of Part B for those recent enrollees; the additional premiums high earners pay; and the $22 reduction in Part B’s 2012 deductible.

When we also take into account the fact that those people becoming eligible for Medicare at age 65 are generally healthier than those who turned 65 in 1990, these are all factors that could lead to lower utilization of Medicare services. In addition, Medicare now is covering more preventative services, which should lead to earlier detection and therefore lower costs.

Since the 2012 figures were released last week, I have yet to see any official figures concerning the solvency of the Medicare Trust Fund. It is well-known and documented that the Medicare Trust Fund is scheduled to be insolvent in a number of years.

I personally would have thought that the future viability of the Medicare Trust Fund would have been better served by keeping the Part B premium at the $115.40 (2011 level) as opposed to rolling it back to $99.90.

In closing, I have had a few clients forward me e-mails that supposedly are showing the planned premium increases for Medicare Part B with an increase of up to $247 in either 2013 or 2014. These are just plain old scare tactics used by one political party or the other and have no basis in fact.

Remember not everything you read in e-mails is true; otherwise I would be a multi-millionaire many times over, due to the lottery I won, without purchasing a ticket. Or was it the long-lost relative who died in deepest darkest Borneo, or the banking official from Sierra Leone with unclaimed funds he needed MY assistance in getting transferred to the U.S.

 

Phil Castell can be reached at 683-9284 or PhilCastell@msn.com.