Medicare Changes for 2012

Retirees and survivors who have elected to be covered by Medicare Part B have every reason to be confused. In 2010 and 2011, retirees and survivors didn’t receive a cost-of-living increase in their annuities or, for those who were eligible, in their Social Security benefits. However, because of a “hold harmless” provision in the Social Security Act, most of those who were receiving Social Security benefits didn’t have to pay more for their Part B premiums. On the other hand, new Part B enrollees and those not receiving a Social Security benefit (including, generally, those retired under CSRS) saw their premiums go up two years in a row.

This year things are different. Because the freeze on Social Security benefits and retiree COLAs ended in 2012, everyone enrolled in Part B saw a change in their premiums. Most of those who had been protected by the “hold harmless” provision saw their monthly premium rise by $3.50 from $96.40 to $99.90, while most of those who hadn’t been protected saw their monthly premiums decrease by $15.50, from $115.40 in 2011 to $99.90 in 2012.

I used the word “most” in the previous paragraphs because, as you may remember, the premiums for Part B are tied to income levels. While most federal retirees fall into the lowest bracket – those with an individual income of no more than $85,000 or joint filers with an income of $170,000 or less – others must pay higher monthly premiums. For example, those with individual incomes of between $85,001 and $107,000 (joint, $170,001 and $214,000) will pay $139.90 a month. Those with individual incomes of between $107,701 and $160,000 (joint, $214,001 and $320,000) will pay $199.80. And those with individual incomes of between $160,001 and $214,000 (joint, $320,001 and $428,000) will pay $259.70. Finally any enrollee with an individual income above $214,000 or joint income above $428,000 will pay $319.70.

While the combination of a Federal Employees Health Benefits plan and Medicare Parts A and B provides maximum protection from out-of-pocket coast for health care, the debate continues about whether enrollment in Part B is worth the cost. There isn’t any easy answer. As is often the case, one size doesn’t fit all. The decision has to be based on what you expect to get in return for what Part B premiums will cost you, both now and in the future.