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On October 18, 2016, the Social Security Administration announced that the annual cost-of-living adjustment (COLA) will increase by only 0.3% in 2017.  Although Medicare premiums won’t be announced until later this Fall, as a result of this small increase to COLA, Part B premiums are projected to increase significantly.

A “hold-harmless” provision in the Medicare statute that protects against a reduction in Social Security benefits if the COLA is not large enough to cover the increase in the Part B premium will protect approximately 70% of beneficiaries who have their Part B premiums deducted from their Social Security checks.  The remaining 30%, including new enrollees, individuals who don’t have premiums deducted from their Social Security checks (including certain public retirees who don’t receive Social Security benefits), and higher income enrollees who are subject to the income-related premium will be subject to a higher premium in 2017 (as will states that pay premiums on behalf of individuals dually eligible for Medicare and Medicaid).   

Earlier this year, Medicare Trustees had projected that based on a lower 0.2% projected increase in the COLA, monthly Part B premiums in 2017 would be $149 (up from the standard premium in 2016 of $121).  The Trustees also projected an increase in the Part B deductible – which would also apply to those held harmless from premium increases – up to $204 from $166.

Medicare beneficiaries faced a similar scenario last year.  Congress intervened to mitigate much of the dramatic cost increases in 2016 for individuals by passing the Bipartisan Budget Act at the end of 2015.  See, for example:

The Center recently joined over 70 advocacy organizations, unions, health plans and others to urge Congress to intervene again this year in order to prevent similar, significant increases in costs. See the Joint letter to Congress submitted in September, 2016.

A Note Regarding “CPI-E”

Although the approach to reduce beneficiary costs taken in last year’s Bipartisan Budget Act would provide a short-term fix, it would not address some of the underlying problems with how the COLA is calculated relating to Medicare beneficiaries’ actual out-of-pocket expenses. One approach would be to change the way that the Consumer Price Index (CPI) is calculated by adopting a CPI for the elderly, or “CPI-E.”  See, for example:

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