For many people, Social Security and Medicare seem to go hand-in-hand. Both benefits are typically received during your 60s, and Medicare premiums are often deducted from monthly Social Security checks. So when the announcement came out at the end of 2018 that Medicare premiums were increasing for 2019, one day after the “Cost of Living Adjustment” of 2.8% was announced for Social Security, it’s hard to blame Americans for thinking they are one in the same. However, in reality, Medicare premium decisions are made by the Medicare system itself, not the Social Security Administration.

For 2019, the Centers for Medicare & Medicaid Services (CMS) announced a slight increase in Medicare Part B premiums from $134 to $135.50 per month, which is a little over a 1% increase. CMS bases their decision to adjust premiums on the inflation that they are seeing in the health care system. Although a majority of Americans on Medicare pay $135.50 per month for coverage, there are some people that fall subject to exceptions. Approximately 2 million individuals on Medicare pay less than the designated amount due to the “hold harmless” provision, which prevents your Medicare premium from increasing in a way that lessens your monthly Social Security benefit. Although this won’t save you much, the average person who qualifies for “hold harmless” pays about $130 per month for Medicare. On the flip side, 5% of Medicare recipients pay an income related surcharge. If you as an individual made over $85,000 in one year ($170,000 for married couples), you are subject to this surcharge which could cause you to pay anywhere from $189.60 per month, up to $460.50 per month, depending on your annual income. Something to note, the Medicare income surcharges are based off the last available tax return, so your 2019 calculation is based off income reported in 2017.

The small premium hike for 2019, along with future increases, may be here to stay. According to the Wall Street journal, monthly premiums could be expected to increase to $144.30 in 2020, a difference of $8.80 per month. This prediction is due to the rise of health care prices in an environment with stagnant inflation.

Do you or a family member have questions on changes to your Medicare premiums?

Contact Sharkey, Howes & Javer today to speak with a CERTIFIED FINANCIAL PLANNER™.

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