Medicare is national health insurance for U.S. residents age 65 and older, as well as younger people who are disabled or have kidney disease. Like most federal programs, Medicare can be complicated and the cost of benefits changes from year to year.
The biggest changes to Medicare you can expect next year are rising premiums and higher out-of-pocket deductibles. I'll cover how much more you may have to pay in 2017 so you can be financially prepared.
Medicare premiums are tied to the cost of living adjustment (COLA) that Social Security recipients receive. Each year, the Social Security Administration (SSA) decides whether to pay a COLA based on the inflation rate from the prior year.
The COLA helps Social Security payouts keep pace with inflation so recipients don't lose purchasing power to pay for necessities, like rent, groceries, and Medicare premiums.
In 2016, there was no COLA because the inflation rate decreased. In 2017, based on inflation numbers so far, Social Security beneficiaries may see a small cost of living increase of 0.2 percent, according to AARP. We'll know more when the SSA makes an announcement in October 2016.
Healthcare Changes to Occur in 2017
So, how do Medicare costs tie in with Social Security COLAs? Well, most Medicare recipients don't pay premiums for Medicare Part A, which covers hospital stays. However, you must pay premiums for Part B, which covers other medical costs, such as doctor visits, outpatient procedures, and medical equipment. Premiums are also required for Part D, which covers prescription drugs.
Let's say there's a year with no COLA, but there is an increase in Medicare Part B premiums. When that happens, about 70% of Social Security beneficiaries won't have to pay the higher premiums. That's because a "hold harmless" clause in federal law prevents Social Security beneficiaries from having their incomes drained by rising Medicare premiums.
If there is no COLA in 2017, most Medicare recipients will continue to pay the same Part B premium, which is $104.90 a month. And if there is a 0.2% COLA, they'll pay just a few dollars more, or $107.60 a month.
But what about the remaining 30% of beneficiaries, who are not protected by the "hold harmless" provision? According to AARP, they're premium will increase substantially from $27.20 to $149 a month for Medicare Part B premiums next year.
And higher income earners, who also aren't covered by the "hold harmless" provision, will likely pay even more. The highest earners, individuals making over $214,000 and couples making over $428,000 per year, could see their premiums go from $389 a month to $467.20 a month, according to an analysis by.
Low-income Medicare recipients whose Part B premiums are paid by a state medical assistance program will not be on the hook for the increases, but their states will bear the added cost.
The Part B deductible also will rise next year, from $166 to $204 per year, according to AARP, for all beneficiaries. The deductible is the amount you have to pay out of pocket before your benefits begin.
Medicare Prescription Drug Changes in 2017
Medicare Part D, or prescription drug coverage, will also have increased premiums and deductibles in 2017.
Premiums will go up from about $34 to $40 per month for those who earn less than $85,000 or couples making less than $170,000 per year. Increases will be even higher for Medicare recipients who earn more.
And the Part D deductible, which is $360, should go up to $400 in 2017.
The best advice is to seek help from a company who can help you choose your Medicare coverage, and get a good supplemental insurance plan, which will help pay some out-of-pocket and excess costs, such as deductibles.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.