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Some Good Comes From Budget Deal

November 30, 2015

I’ve written before about how there would likely be no cost of living adjustment (COLA) in Social Security benefits for 2016. Well, it’s certain now – no COLA. This will mark only the third time since 1975 that there has been no COLA. And make no mistake, there are a lot of negatives stemming from this situation when viewed in light of the latest budget deal.

 

But there’s actually a big plus too, specifically for 30% of Medicare beneficiaries – many of whom use the soon-to-be-defunct “file and suspend” strategy.

 

These folks don’t receive Social Security benefits, so they don’t have their Medicare premiums deducted directly from Social Security. That means they’re not covered by Medicare’s “hold harmless” provision, which prevents Part B premiums from increasing more than the Social Security COLA.

 

Absent the latest budget (and its Treasury loan to the Medicare program), those 30% of Medicare beneficiaries would’ve been on the hook for the entire upcoming premium increase. That could’ve meant a 52% premium increase for some!

 

Thankfully, the budget deal helped them. “Hold harmless” is still in place, so the entire increase is on that 30% of beneficiaries, but a $7.5 billion Treasury loan lessened the impact to an average 15% premium increase.

 

That’s still a potentially big jump, but it’s less than the 30% hike that was projected months ago. I say “potentially” because official 2016 Medicare premiums haven’t been announced yet – go figure.

 

So this budget did have some positive effect. But it’s a short-lived “victory” at best because Medicare beneficiaries will start paying back that Treasury loan in 2017, with each seeing a roughly $3/month increase in premiums.

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