Seniors get the biggest Social Security raise in years and it’s already eaten up by a 14.5% increase in the Medicare premium

Premium Increases

With a 14.5% increase, the Part B premium for a single individual — with income less than $91,000 — is slated to rise from $148.50 in 2021 to $170.10 in 2022. Since Medicare premiums increase with income, individuals with income of $170,000 to $500,000 will see their premium increase from $475.20 to $544.30. (See Table 1 for 2022 premiums.)

How did this happen when healthcare costs grew by only 0.4% in the past year ? And the announced COLA increase was also higher than the 6.7% predicted by the CMS Trustees in August. 

Factors

Apparently, the increase was due to three factors: 1) projected rising prices and increases in intensity of care; and 2) making up for a cap in Part B premium increases in 2020. 3.) relates to Aduhelm, the new Alzheimer’s drug estimated to cost $56,000 a year. The process is still under way to determine whether and how Medicare will cover Aduhelm. CMS decided to increase “contingency reserves” to cover possible higher expenditures in the future.

Effects

Aduhelm falls under Part B instead of Part D. It is administered in physicians’ offices rather than purchased at a pharmacy. One implication of being under Part B is that traditional enrollees have to pick up 20% of the cost of most Part B medications, which would translate into about $11,200 in out-of-pocket costs for those prescribed Aduhelm.  

So where does this increase in premiums leave Social Security beneficiaries after they pay the higher premium? An individual currently receiving $1,600 a month (the approximate average retiree benefit) will see benefits go up by $94 from the COLA. However, they will pay $22 more in Medicare premiums. Resulting in a net increase of $72 or 4.5% of the original benefit amount. Thus, while the Part B increase does not eliminate the COLA, it erodes its inflation protection.