States on hook for rising Medicare premiums

State Medicaid agencies are bracing for hundreds of millions of dollars in new obligations, thanks to a significant increase in Medicare premiums.

This summer, the 2015 Medicare Trustees Report projected Part B premiums would increase by 52%—up to $159.30 a month from $104.90.

However, most Medicare beneficiaries will be spared, as roughly 70% of them pay their premiums through deductions from their Social Security benefit checks. The “hold harmless” policy shields beneficiaries from premium hikes that outpace cost-of-living increases. That means Social Security check amounts will not decline from one year to the next because of increases in Medicare Part B premiums.

Not protected are those who do pay Part B premiums out of pocket, which includes those newly enrolled in Medicare and individuals dually eligible for Medicaid.

The additional cost would fall on the states, said Juliette Cubanski, associate director of the Program on Medicare Policy at the Kaiser Family Foundation. “If the actual increase is anywhere in line with the projected increase, it could be a pretty big impact in terms of the additional costs that states would bear,” she said.

HHS sets Part B premiums every fall, and they are expected to be released this month.

It’s only been in recent weeks that states have begun to realize what the projected hike would mean to their bottom lines. And they are very con- cerned, said Matt Salo, executive director of the National Association of Medicaid Directors. “This is one of those sleeper issues that kind of snuck up on everybody,” he said.

California, which faces $550 million in new costs, is calling the premium hikes an “urgent fiscal issue” and sent a letter to Congress asking it to act.

Other states are reacting similarly.

“This unforeseen increase literally shocked us,” said Tom Shanahan, spokesman for the Idaho Department of Health and Welfare, which estimates it will incur nearly $20 million in additional Part B premium and deductible costs.

Medicare Part B premium increases are nothing new, but states say they have never seen anything like this.

“An annual increase in the Part B Premium is included in Texas Medicaid cost projections, but not of the magnitude that the CMS has under consideration,” said Bryan Black, a spokesman for Texas’ Health and Human Services Commission. The state is projecting as much as $80 million in new costs as a result of the increase.

A spokesman from Virginia’s Department of Medical Assistance Services said his agency projects new costs of more than $66 million.

For dual-eligibles with incomes above 120% of the federal poverty level, states pay for Medicare Part B premiums via a block grant program called the Qualified Individual program. Last month, Arizona officials informed the CMS that it would deny any new applications from qualifying dual-eligibles wishing to have their premiums paid for under the program.

Without the QI program, people will need to pay the full Medicare Part B premium, which they will likely be unable to do, given their income, Salo said. No other states have spoken about capping QI enrollment.

And even dual-eligibles who don’t get their premiums paid for through the QI program could be affected.

“An increase of this magnitude to Part B premium costs may lead to states either decreasing Medicaid payments to health plans for dual-eligibles, or may act as a disincentive for states to enroll people who stand to benefit from the program,” said Meg Murray, CEO of the Association for Community Affiliated Plans.

The CMS says it would take an act of Congress to avoid the premium increases.