With a projected Medicare Part B premium increase of as much as 52% looming for 2016, beneficiaries and state governments are waiting to see whether Congress or the Obama administration will come through--and quickly--with a solution. If not, the impacts will be felt far and wide, and not just by beneficiaries and state governments, experts say.
Why the possible increase?
The situation arises because there will not be a cost-of-living increase for Social Security recipients in 2016. Those Medicare beneficiaries who have their premiums deducted from their Social Security payments (about two-thirds) are protected by a law that forbids their premiums from increasing more than their Social Security benefits. However, that leaves the remaining beneficiaries to bear the entire cost increase of the 2016 Medicare program. This would include individuals newly enrolling in Part B in 2016, beneficiaries with higher incomes and Medicare/Medicaid dual eligibles, whose premiums are covered by state Medicaid programs.
Problems with that scenario
The situation presents a hardship to state governments because they pay the Medicare Part B premiums for dual eligibles with incomes above 120% of the federal poverty level.
In lay terms, states will be picking up the tab for the federal program, notes Matt Salo, executive director of the National Association of Medicaid Directors.
“You have to keep in mind what a bad public policy this is to begin with,” he says. “Medicare’s solvency problems are being paid for by state governments.” If states have to do this, he says, it pits the needs of Medicare beneficiaries against others in the state, such as children.
“For the states, it’s a $2.3 billion spike in costs in 2016, and we don’t have that much fat in the system to trim, or that much change lying under a couch cushion,” Salo says. “That kind of spike necessitates countermeasures.”
According to Salo, there are three types of possible countermeasures:
- Cut people off the rolls;
- Cut the benefits you give people; and
- Pay providers less to deliver those services.
“If you need to get savings in the short-term, that’s it, and none of those is a scenario that anyone wants to see,” he says.
A solution in sight?
Salo says he’s cautiously optimistic a solution will be reached because he’s hearing general agreement, from both Democrats and Republicans in the House and Senate, that it needs to happen.
He notes companion bills have already been introduced in both houses to freeze the premiums at 2015 levels. “They would completely fix this for 2016 for the states and the Medicare beneficiaries that it would directly impact,” he says.
Other possibilities have been discussed, but Salo suggests those bills, as introduced, are the best and likeliest solutions.
He adds it'd be better the sooner it gets done because states are going to have to make decisions about competing priorities before the increase would go into effect January 1, 2016.
Salo adds anybody who has an interest in Medicaid working well has a stake in this, including consumer advocates, provider advocates, and insurance companies. “When you go at the heart of Medicaid funding--and the heart is the state’s share of the match--when you jeopardize that, then everybody goes down with that vote,” he says. “Congress has a solution in front of it and it’s just a matter of finding the political will to make it happen. And I think they can do it.”
Dr. Juliette Cubanski, associate director of the Program on Medicare Policy at the Kaiser Family Foundation, takes a similar view but stresses offsets still have to be found for the funding, so it’s “anybody’s guess as to what we’ll actually see happen.”
She adds the situation presents additional pressure for states that have expanded their Medicaid program. “It’s a balancing act that may be difficult,” she says.
Cubanski also notes while the Medicare Part B premiums are getting a lot of attention, people seem to have taken less notice of the fact the deductible for Part B services would go up at the same rate, and that amount is not subject to the Hold Harmless provision, so everybody would have to pay the higher Part B deductible amount.
“It’s $147 in 2015, so if that increases by 50% it will be somewhere in the range of $220 next year,” she says. “It may not sound like a lot, but to those living on a low, fixed income, it could be a burden to their ability to access healthcare.”
She says policy makers are looking at both, and the proposed legislation in play would freeze both at 2015 levels. “The issue is where the money would come from to pay for it,” she says, “and I haven’t heard a lot of discussion on that piece.”