Medicare Part A and Part B premiums set for CY 2017

Medicare Enrollees age 65 and over who have fewer than 40 quarters of coverage and certain persons with disabilities pay a monthly premium in order to receive coverage under the Medicare Hospital Insurance Program (Medicare Part A). Individuals who had at least 30 quarters of coverage or were married to someone with at least 30 quarters of coverage may buy into Part A at a reduced monthly premium rate, which will be $227 in calendar year (CY) 2017, a $1 increase from CY 2016, according to the CMS. The notice also provides that uninsured aged and certain individuals with disabilities who have exhausted other entitlement and who have less than 30 quarters of coverage will pay the full premium, which will be $413 a month in CY 2017, a $2 increase from CY 2016.

Comparison to CY 2016. The CY 2017 premium of $413 is approximately 0.5 percent higher than the CY 2016 premium of $411. CMS estimates that approximately 654,000 enrollees will voluntarily enroll in Medicare Part A, by paying the full premium. The CY 2017 reduced premium of $227 is approximately 0.5 percent higher than the CY 2016 reduced premium of $226. CMS estimates an additional 67,000 enrollees will pay the reduced premium. CMS estimates that the total aggregate cost to enrollees paying these premiums in CY 2017, compared to the amount that they paid in CY 2016, will be about $17 million.

Part B premiums increase. The standard monthly Part B premium rate for all enrollees for 2017 has increased by more than $12.00 to $134.00 from 2016, while the Part B deductible has been raised by $17.00 to $183.00, according to the Notice of Medicare Part B monthly actuarial rates, premium rate, and annual deductible, published in the November 15 Federal Register. Beneficiaries paying income-related monthly adjustments will pay total monthly premiums of 35, 50, 65, or 80 percent of the total cost of Part B coverage, plus $4.20, $6.00, $7.80, or $9.60.

Premiums. The standard Part B premium rate, paid by beneficiaries filing individual tax returns whose monthly adjusted gross income (MAGI) does not exceed $85,000, and by individuals filing joint tax returns whose MAGI does not exceed $170,000, represents approximately 25 percent of the expected average total cost of Part B coverage for aged enrollees, plus $3.00. Beneficiaries whose MAGI exceeds the thresholds will pay monthly premiums of 35, 50, 65, or 80 percent of the expected average total cost of Part B coverage, depending on income tax and filing status. Beginning in 2018, income thresholds for the two highest ranges will be lower, due to the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (P.L. 114-10).

Actuarial rates. The monthly actuarial rate for aged enrollees is $261.90. The rate is one-half the sum of the projected costs of benefits and the cost of administrative expenses for each aged enrollee, plus adjustments allowing for interest earnings on assets in the trust fund and adequate contingency margins. Contingency factors affecting the actuarial rate included low Social Security benefits cost-of-living adjustments triggering the hold harmless provision, additional revenue from brand-name drug fees required by the Supplementary Medical Insurance (SMI) trust, and an adjustment for health information technology (health IT) incentive payments in 2017. The monthly actuarial rate for disabled enrollees is $254.20.

10 percent increase. Assets minus liabilities at the year’s end should represent 15 to 20 percent of the following year’s total incurred expenditures. Typically, the target reserve ratio is 17 percent, but the HHS Secretary has directed the use of a target reserve ratio for the Part B premium determination of 13 percent by the end of 2017. Because that reserve ratio is lower than the estimated minimally financially adequate level of 14 percent, future financing rates will likely increase to restore the contingency reserve. “With the selected target reserve ratio, the Part B premium in 2017 is a 10 percent increase from 2016.”

SOURCE: 81 FR 80071, November 15, 2016; and 81 FR 80063, November 15, 2016.

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