Editors' pick: Originally published Sept. 15.
Buckle up for disturbing news: your Social Security check may well go down in 2017 - and that is despite a 0.2% projected
But this is inside the Beltway, Washington, D.C. reality, so know that many millions of Social Security recipients won't actually pay a scheduled Medicare increase and therefore won't see a decrease in their Social Security benefit. But other millions will.
Confused? And in which camp are you - those who pay or those who don't?
Start with this reality. The minuscule Social Security increase is due to an annual Cost of Living Adjustment (COLA). In 2016, recipients got no increase at all - the third time in four decades. In 2017 a person getting $1,000 monthly from Social Security will get about a $2 increase. On the average monthly benefit of $1,304, count on about $2.60 more, maybe enough for a small coffee at Starbucks.
As for why some Social Security checks will go down, blame that on a sharp boost in Medicare Part B costs. In 2015, Medicare Part B - which covers doctors bills, along with charges by some other providers - amounted to $104.90 per month. In 2016 that climbed to $121.80. In 2017 it will hit $149.
Most pay for Medicare automatically, via Social Security deduction. Thus the smaller checks. But only for some.
The big complication: there is a hold harmless law that multiplies the complexities. It says that - usually but not always - you aren't responsible for the Medicare Part B increases. That presumably is a nod to the economic and political reality that many Social Security recipients -- some 33% according to the Center for Budget and Policy Priorities - rely on Social Security for the vast majority of their retirement income. The "not always" is the kicker here.
That's because, although an estimated 70% of Medicare recipients are exempt from the Part B price hikes, 30% are stuck with the tab and that includes those new to Medicare, those in Medicare but paying out of pocket because they are not also in Social Security and those paying higher monthly Medicare fees because of their incomes.
Paying more? Yes. Part B costs are means tested. If your modified adjusted gross income is $85,000 to $107,000 (or $170,000 to $214,000 in a joint return), you pay $170.50 monthly in 2016. That scales up until income exceeds $214,000 ($428,000 on a joint return) when you pay $389.80 for Medicare Part B. Those numbers go up more in 2017.
Is it fair for some to pay much more for Part B than others?
Ash Toumayants, a financial advisor in State College, Penn., said that this system is creating what may be a longterm disparity in treatment. And that disparity may only get worse.
Looking ahead, Toumayants said he doesn't see significant Social Security increases coming down the pike - we seem to be in a low inflation era - but, very probably, Medicare Part B costs will continue to rise. Some will pay those increases, many others won't.
Said Toumayants: "if this goes on for ten years, people will be paying three or four times more for Medicare Part B than others are paying. That's a problem."
Maybe so, but right now, nobody in power in Washington DC is talking about a solution.
That leaves solutions up to individuals. "You need to make sure you have enough income coming in to keep up with the increasing cost," said Michael Foguth, founder of Foguth Financial Group in Brighton, Mich.
But that can raise its own problem. A nasty gotcha that may arise is pointed out by Christopher Lester, president of Professional Planning Services in Somerset, N.J.: by pulling money from retirement accounts to handle Part B costs some people will find they trigger more income tax payments.
Some may also trigger still higher Medicare Part B charges if their income crosses the means tested threshold.
Word of advice: if you are snagged in a situation where probably you will have to pay the Medicare Part B premium hike, talk with a financial adviser who has Medicare savvy. Probably - multiple experts said - you will still be stuck with paying the premium. But a lot of money may ride on this, over many years, so let an expert tell you if there is safe exit.
This article is commentary by an independent contributor. At the time of publication, the author held TK positions in the stocks mentioned.