2012 Medicare Premiums Will Be Lower Than Expected

On the heels of the announcement of a 3.6 percent increase in Social Security benefits in 2012 comes news that Medicare's monthly premium will be much lower than expected next year -- and will actually drop for millions of beneficiaries. Administration officials said the new health reform law was partially responsible for keeping costs down.

The basic premium for Medicare Part B will be $99.90 a month, only a $3.50 increase over the $96.40 a month that most beneficiaries have been paying since 2008. This increase is $7 a month less than what was being projected as recently as last May and means that most people with disabilities will be able to keep the lion's share of their Social Security benefit increase. In addition, higher-income earners and others who have not benefited from the recent premium freeze will see a significant drop in their premiums.

Most Medicare recipients have not experienced a rise in their Medicare Part B premium -- which pays for doctor visits and other outpatient costs -- because of a provision in the Medicare law prohibiting premiums from climbing more than that year's cost-of-living increase in Social Security benefits. Since there has been no Social Security increase in the last couple of years, most beneficiaries nearly three-quarters have continued to pay Part B premiums of $96.40 per month. However, many people with disabilities do not ever have to pay Part B premiums because they are paid by their state Medicaid programs.

Donald Berwick, MD, the now-former administrator of the federal Centers for Medicare and Medicaid Services, said one big reason for the lower-than-expected premium hike was historically low rates of health care utilization, which he attributed in part to the health reform law's focus on preventive services. In addition, the unexpected Social Security benefit increase meant that rising Medicare costs could be spread among many more beneficiaries, with each one paying a smaller share.

For Medicare's Fact Sheet on the new numbers, which includes the new Medicare Part D premium adjustments for high earners, click here.

Article Last Modified: 12/05/2011