The Social Security Administration has authorized a 3.6% cost of living adjustment (COLA) increase which became effective on the first of the year. At the time this increase was announced there was speculation that the expected increase in Medicare premiums would significantly reduce, and possibly completely offset, any benefit increase. That has not happened, and the recently announced increase in Medicare Part B premiums has been much smaller than originally anticipated. As a result, most seniors will see an increase in their income in 2012.
The standard Medicare Part B premium will be $99.90 per month in 2012, up $3.50 from the $96.40 that most recipients pay, but less than the $106.60 that Medicare’s trustees had projected earlier in the year. In addition, some recently enrolled younger retirees will actually pay less in premiums, as they have been paying from $110.50 to $115.40 per month. Their premiums will now be at the $99.90 level. Also, the deductible for Part B, which covers costs associated with physicians’ services, outpatient hospital services, some home health services, and durable medical equipment, will actually decline by $22, to $140, in 2012. Part B’s standard monthly premium will still be adjusted for those with higher modified adjusted gross income (MAGI). Therefore, those individuals whose MAGI exceeds $85,000 and who file an individual return and couples whose MAGI exceeds $170,000 and who file a joint return will see a larger increase in their Part B premium.
The premium for Part A, which covers inpatient hospital, skilled nursing facility, and some home health care costs, will increase by only $1, to $451, although most Medicare beneficiaries do not pay any premium for Part A because they have at least 40 quarters of Medicare-covered employment. The deductible for a hospital inpatient stay will now be $1,156, an increase of $24. The premiums for Medicare Advantage plans, known as Medicare Part C, and Medicare Prescription Drug Coverage, known as Medicare Part D, are expected to decrease slightly for 2012.
In summary, for most Medicare recipients, the increase in premiums in 2012 will only slightly reduce the net value of their increased Social Security benefits. For those recipients who actually enjoy a decrease in Medicare premiums, their incomes will increase by even more than the 3.6% COLA increase.
