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STAGGERING INCREASE IN MEDICARE PART B PREMIUMS AVERTED BY CONGRESSIONAL BUDGET DEAL

Medicare

The President has signed the  “Bipartisan Budget Act  of 2015” on November 2 , 2015  that otherwise could have resulted in as much as thirty percent of Medicare beneficiaries seeing a fifty two percent increase in their monthly Medicare Part B premiums (which cover doctor’s bills, etc.). Instead of increasing Medicare Part B premiums, the budget deal includes a reduction in Medicare payments to doctors and other health care providers.   Also, there is a proposed elimination of certain Social Security income planning strategies presently used to increase a married couple’s Social Security income. Also, the Budget Act prevented a 19% cut to an estimated 9 million disabled workers and 1.7 million children who get Social Security disability benefits by shifting $124 billion in payroll taxes to a separate trust fund that covers benefits for retired workers so that there should be adequate funds to pay those who are disabled until year 2022.

Due to a law that requires Medicare premiums cover increases in Medicare costs (except for those Social Security recipients who are also Medicare beneficiaries), about thirty percent of Medicare beneficiaries (new Medicare beneficiaries, seniors earning more than $85,000 a year, beneficiaries of both Medicare and Medicaid, and those enrolled in Medicare but who are not yet receiving Social Security) were facing a premium increase to at least $159.30 per month (usually it is $104.90 per month) to as much as $509.80 per month for certain retirees with high income. If the budget deal had not been reached, many seniors would have likely decided to not delay in taking their Social Security income (many presently delay collecting Social Security until after 65 so that their monthly Social Security income would be greater) since the “hold harmless” provision of the law prevented an increase in the Medicare Part B premiums (usually $104.90 per month) if they receive Social Security. The new Budget Act will still increase the Medicare Part B premiums to $120 per month plus a $3 surcharge (as a result of the U.S. Treasury lending money to the Medicare trust fund)  for most of the approximately30% of Medicare beneficiaries in the categories mentioned in this paragraph. However, the premiums for higher income individuals will be much greater than that. The premiums for the 70% receiving both Social Security and Medicare shall remain at $104.90 for the coming year.

Social Security and Supplemental Security Income for 2016 will remain as they were in 2015 since the consumer prices (such as the cost of gas) are down for the past year. In this author’s opinion, the present inflation gauge is unfair to seniors since it is based on goods and services bought by working people who generally have less health care costs. It would seem to make more sense that the cost of living adjustment be tied to the consumer price index for the elderly (since they are the ones affected) which would take health costs of the elderly into consideration.

Finally, the Budget Act comes at a price as two most common techniques (filing a restricted claim of spousal benefits and doing a “file and suspend”) for increasing Social Security will be eliminated. The restricted claim strategy ends on December 31, 2015 for anyone who attains age 62 after that date. The restricted claim strategy is used since married workers have a choice to receive a retirement benefit based on the work record of their spouse or on their own work record. As a result, some workers reaching full retirement age presently file a restricted application requesting only on the work of their spouse while continuing earn delayed credits on their own work history since the longer you delay receiving your Social Security income, the more monthly income you can get. So, they would delay receiving their own Social Security until age 70 increasing their monthly income at that time. The new Budget Act will now only let you get higher benefit (not both).

A similar strategy called “file and suspend” will be eliminated as of April 30, 2016. Current Social Security rules allow a worker who has reached his or her full retirement age (generally now 66) to apply for (“file”) and then delay (“suspend”) receiving their benefit payment up to 4 years (until age 70) while allowing your spouse to receive benefits based on your earnings record. Your monthly Social Security income increase 8% for each year delay receiving your income from Social Security. This gives the couple up 4 years of spousal benefits. l The new Act prevents spousal benefits to be paid during the suspension period – even if a suspension claim has been made. As a result of this new law, workers who turn 66 before April 30, 2016 and have a spouse within 4 years age difference should consider this strategy before the law changes.

For help with navigating the medicare and social security changes, call our Dallas office for a consultation. 214-720-0102

 

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