Part B Premiums Versus the COLA — Updated
Updated to include projected Part A 2022 deductibles
On August 30, trustees for Social Security and Medicare released their massive annual reports on how they fared in 2020, their financial footings, and the outlook for the nation’s primary retirement and health-care programs.
The short answer is that the financial soundness of both programs continues to be threatened. Shrinking payroll taxes are the primary culprit for Social Security. Rising health care costs are the villain for Medicare. The pandemic overshadowed both programs, and continues to do so, making projections tenuous.
What’s not uncertain is that the clock is ticking for key trust funds for both programs. Social Security will be unable to fully pay beneficiary claims by 2034, a year earlier than projected in last year’s report, at which time incoming revenues will cover only 78 percent of payable benefits. Medicare’s hospital trust fund has only five years of solvency, and would be able to pay 91 percent of expected costs in 2026.
These reports continue to be a statistical tour de force, and contain the nearest thing we have to definitive reports and projections. They are must-read documents for Washington policymakers and researchers.
Older and disabled residents of the United States, however, may be forgiven for viewing them (which they seldom do) as the programming equivalent of a very bad evening of C-SPAN.
As a card-carrying beneficiary of both programs, one piece of news jumped out at me. It was in Table V.E2 on page 210 of the Medicare report. Next year’s monthly premium for Part B of Medicare was projected at $158.50 – $10 higher than this year’s premium of $148.50.
While experts’ alarms about rising health costs may seem like statistical mumbo-jumbo, tacking on $10 a month to the primary Medicare expense that most people must pay will be a major shock. The annual Part B deductible would rise to $217 from $203 this year. Medicare’s high-income surcharges will rise by about 6.7 percent, adding more than $2 billion to the monthly Part B premiums paid by about 7 percent of Medicare’s high-income beneficiaries.
The report includes projections for Part A hospital, nursing home, and other deductibles. While these numbers are not officially adopted by Medicare, they have been spot-on in past reports:
Inpatient hospital deductible: $1,556 $1,484
Inpatient daily coinsurance
Days 61-90 $ 389 $ 371
Lifetime reserve days $ 778 $ 742
Skilled nursing daily coinsurance $ 194.50 $ 185.50
Monthly Part A premium*
Standard $ 499 $ 471
Reduced $ 274 $ 259
*For those not qualifying for premium-free Part A
Projections for Part D prescription drug programs are an average monthly premium of $32.64, down from $33.06 this year. This does NOT mean drugs will be cheaper, only that drug plans will be reducing premiums but more than making up for that in higher charges for the drugs you use.
Other key 2022 Part D metrics have already been annouced: the annual deductible will be $480, up from $445 this year; the coverage gap in Part D plans will kick in when insured drug costs have hit $4,430, up $300 from this year, and, the catastrophic coverage zone of the plans (when consumer payments are limited to no more than 5 percent of a drug’s cost) will occur when out-of-pocket costs have reached $7,050, up from $6,550 in 2021.
The Trustees’ Social Security report does not carry a definitive estimate of next year’s cost of living adjustment, which has been widely projected at between 5 and 6 percent, the largest in many years. This will help cushion higher Part B premiums for all but those receiving the most meager Social Security benefits. They will be protected from any net reductions in their Social Security by what’s called the program’s “hold harmless” rule.