Learn About Medicare Premiums for 2018

Be prepared for a Medicare premium increase in 2018 due to an uptick in the social security cost of living by 2%. That is the greatest social security increase in six years. Unfortunately, many seniors will not benefit from the increase due to having to pay higher Medicare premiums.

Currently, most American seniors can get Medicare Part A free of charge but have to pay for Parts B and D. Experts estimate that about 43% of Medicare beneficiaries will see their Part B premiums rise by 23%.

Medicare's 2018 Part B premium is based on your income and when you enrolled. The base premium for new enrollees is $134 a month.

However, some people who enrolled in earlier years have been paying $109. This was due to a hold harmless provision that protected them from premium increases in years where there was no Social Security cost of living adjustment. Since this year there is a COLA increase, many of the people will see their premiums climb to match the base premium.

Higher Premiums for Higher Incomes

People with higher incomes will also pay more based on their modified adjusted household gross income in 2016. The IRS submits your tax returns from two-years prior to Social Security, who then determines your premium for the upcoming year.

Individuals that make over $85,000 annually and married couples that make over $170,000 combined annually will pay larger premiums than the base premium. People who make $160K (or married couples that make $320k or more) will pay the max monthly premium amount of $428.60/month.

Now, those are some large numbers that are certainly intimidating. However, only about 6% of Medicare beneficiaries pay more than the base premium. If you have recently retired, you may have been earning more in 2016 than you are now. You can file with Social Security to have them reconsider your premiums based on new information that you present. If you can show that you earn less now than you did two years ago, there is a good chance that they will reduce your premiums for Part B.

Visit the Social Security website to print a Request for Reconsideration form. Instructions are provided on how to return that to the Social Security office for reconsideration.

Covering the Gaps

What makes things more difficult is that even at these rates, Medicare doesn’t pay for everything. There are deductibles and coinsurance to be paid at the time of service. For example, Medicare Part B only covers 80% of your costs after you pay the Part B deductible. Since Part B covers surgeries, you could find yourself owing 20% of a surgery. This can be many thousands of dollars of out of pocket for you.

To avoid such large out-of-pocket expenses, many people consider Medicare supplements. These policies complement Original Medicare and reduce, or eliminate, gaps in coverage. Medicare supplements can be purchased privately through an insurance broker or directly with the insurance company. Brokers can help you compare rates for multiple companies and also provide advice and plan options for your consideration.  In most states, you will have ten standardized plan options to choose from. This allows you to compare pricing while knowing the benefits for each plan letter are the same from one carrier to the next.

You must be enrolled in both Medicare Parts A and B before you can apply for a Medicare supplement. Your 2018 Part B premium must be paid in addition to any additional voluntary coverage added. Also, you need to live in the plan’s service area at the time of purchase. You can, however, take your Medigap coverage with you anywhere you go in the United States.

While Part D prescription drug coverage is not required, it is encouraged due to the rising costs of medications. Each insurance company sets their own Part D base premiums for each plan. However, the federal government can also assess a Part D premium adjustment based on income. Those who make more than $85,000 individual and $170,000 married will pay more. Medicare will simply add the extra premium to your monthly Part D bill.

Be aware that if you fail to enroll in Part D coverage when you first become eligible and you have no other coverage, you will have to pay a late penalty.