Medicare premiums are set to rise
In 2022, Medicare beneficiaries will pay higher Part B premiums as well as income-related surcharges. These increases were announced on Nov. 12 by the Center for Medicare and Medicaid Services (CMS). They are the largest annual increases in recent history.
The standard Medicare Part B premium will increase from $148.50 to $170.10 per month. Part B covers doctors visits and other outpatient services. According to CMS, the increase is due to the rising prices and increased utilization of services across the health care system during the pandemic and anticipated intensity of care provided. CMS also indicated that Medicare needs to build contingency reserves because of the uncertainty regarding the potential use of the Alzheimer’s drug Aduhelm by people with Medicare.
By law, Part B monthly premiums must equal 25% of the estimated total Part B costs for enrollees 65 and older. In addition, the program must maintain adequate reserves in case costs are higher than anticipated.
“CMS is committed to ensuring high-quality care and affordable coverage for those who rely on Medicare today, while protecting Medicare sustainability for future generations,” said CMS administrator Chiquita Brooks-LaSure. “The increase in the Part B premium for 2022 is continued evidence that the rising drug prices threaten the affordability and sustainability of the Medicare program.”
High-income surcharges for 2022 are based on income reported on your 2020 tax return. There is always a two-year gap in time from between your tax return and the possible high-income surcharge, also known as income-related monthly adjustment amount (or IRMAA).
In 2022, individuals with modified adjusted gross income (MAGI) of $91,000 or more and married couples with MAGI of $182,000 or more will pay a surcharge of at least $68 a month. Tables for the surcharges can be found at https://secure.ssa.gov/ poms.nsf/lnx/0601101020. If both spouses are covered in Medicare, the premiums and surcharges are twice as much.
If you are subject to high-income surcharges on Part B premiums, you will also be subject to monthly surcharges on your prescription-drug plans. The additional surcharge ranges from $12.40 a month to $77.90 a month.
In November, the Social Security Administration announced the largest COLA adjustment to benefits in recent years: 5.9%. The average benefit for a retired worker will increase by $92 a month in 2022, and the average benefit for a couple will increase by $144 a month. Accordingly, the increase in benefits for most Social Security participants will be greater than the increase in Part B premiums. However, according to The Senior Citizens League, the Medicare B price increases will essentially cancel out the COLA adjustment of Social Security recipients with the lowest benefits.
Part B premiums have ranked as one of the fastest-growing costs that older retirees face in retirement. It is not likely that will change in the near future.
Many retirees are considering Roth conversions. It is important that retirees who are looking into this consider gradual conversions to avoid large increases in MAGI, which can lead to large surcharges two years later.