Medicare Premium Increases for 2018

When I watch the news, I see plenty of coverage about how the 2017 Tax Cuts and Jobs Act will help businesses, but it can be difficult to determine exactly how this Act will affect individuals. We recently sent out a letter about changes in various tax brackets, exemptions, and deductions that did a good job of outlining some major differences between the previous tax code and the new as it pertains to individuals and families. However, one of our valued clients, Mark L., pointed out that we did not shed enough light on the impact that the Tax Act had on Medicare. Many retirees could see an increase in their Medicare Part B premiums in 2018 for two reasons.

First, although the standard Medicare premium for Part B is $134/month, many participants paid around $109 in 2017. There is a law that prevents Medicare Part B payments from decreasing Social Security benefits year to year. Since the increase in Medicare Part B premiums outpaced the Social Security cost-of-living adjustment in 2016 and 2017, this law allowed people to pay less than the standard $134/month because doing so would have reduced their Social Security benefit. The Social Security cost-of-living adjustment in 2018 was 2%, so there is now room for Medicare premiums to go up to the standard level without reducing a retiree’s Social Security benefits from last year. In summary, although Social Security is supposed to increase 2% this year, many will not see all of that 2% raise because their Medicare Part B premiums will increase.

Second, the Tax Act changed the Income Related Monthly Adjustment Amount (IRMAA) sliding scale tables. When you sign up for Medicare you choose a Part B medical plan that covers things like outpatient care, preventive services, ambulance services, and durable medical equipment. This has a base premium; however, those who make above certain income thresholds pay a surcharge ranging from $53.50 to $294.60 per month. The table below shows the Medicare premium surcharge and the change in income brackets from 2017 to 2018. The net impact is that some high-income retirees will fall into higher surcharge brackets than they were in for previous years, raising their overall costs. Additionally, this table is for individual filers, if you are married filing jointly then the income limits are double those listed below.

Medicare and Social Security have many nuances and it can be very difficult to wrap your head around all of the moving parts. However, these are programs we have paid into our whole professional life so we believe it is very important to understand how they are working to make sure we are receiving what we deserve. We are passionate about educating those that partner with us at Virtus Wealth Management and helping you understand Social Security and Medicare is a big part of that. If you are looking for clarity and understanding in these areas or if you have any feedback you just want to discuss with us, feel free to give us a call at 817-717-3812.