Sunday, November 1, 2015

News on Medicare and Social Security

     Last week's agreement on the federal budget brought two new developments for retirees -- one about Medicare, the other on Social Security.

     According to a report in the Washington Post, the premium increases for some Medicare customers will not be as punishing as previously reported (see my Oct. 13 post Who Pays More for Medicare).

     Under the first proposed plan, most people who do not have their Medicare premium deducted from their Social Security benefit would have seen a 52 percent increase in their premium for Medicare Part B, from $104.90 to $159.30. (The exception: individuals making over $85,000 a year, or couples making over $170,000 a year, who pay more.) Medicare recipients who do have their premiums deducted from their Social Security payment were "held harmless" -- in other words, they were protected from any increase at all.

     The reason for the disparity: a federal rule says that Medicare rates in a given year cannot increase more than Social Security checks. Since Social Security benefits are not going up next year (because inflation is judged to be zero) Medicare charges cannot go up. That meant people who are on Medicare, but who do not receive Social Security, had to pick up the difference. That would have punished approximately 16 million people, or 30 percent of Medicare recipients, with the 52-percent increase..

     The new agreement still holds harmless anyone who has Medicare deducted from their Social Security. But it limits the increase for the rest to some 17 percent, raising their premium from $104.90 to about $123 per month. The extra money to cover the difference will come from "a loan from the U.S. Treasury to the Medicare trust fund." The loan will presumably be paid back over five years with a $3 per month "surcharge" embedded in the new premiums.

     Please don't ask me to explain any further details, because I do not have the wherewithal to dig deep into the weeds of Medicare financing. Do any of us? But personally, as one of the 16 million, I do appreciate the financial shenanigans that will save me $30-some per month next year.

     And speaking of shenanigans, the New York Times reported yesterday that the federal budget deal also closes two "loopholes" in filing for Social Security. One is called the "file and suspend" strategy. This maneuver allowed two-income married couples to boost their benefits. One spouse would file for benefits, then immediately suspend them, allowing them to collect while the spouse's benefits continued to grow at the Social Security rate of about 8 percent a year.

     The other loophole was known as "restricted application." This allowed married people who reach full retirement age (66 for most of us) to collect a spousal benefit while their own benefits continued to increase -- again, at the 8 percent rate.

     Starting in 2016 filers will no longer be able to utilize these strategies. But don't worry. If you took advantage of either of these methods in the past you will be grandfathered in. Apparently, there aren't that many -- something less than 1 percent of Social Security recipients used one of these strategies to boost their benefits. But, presumably, it will save the Social Security system billions of dollars in future obligations. And, assuming the file-and-suspend people were not the neediest among us, that's probably not a bad thing.

21 comments:

Jono said...

Bummer! I get to sign up for medicare next summer. It is (was) less expensive and has better coverage than my current plan through work. This increase will put a noticeable dent in that, but it will still be a better deal. My employer, however, will cover my supplemental. From a financial point it is not likely that I will ever be able to fully retire. Oh, well.

DJan said...

As one of those who has been retired for awhile and having my Medicare taken out of my SS benefits, I'm happy about this, but I am also not expecting more than another year of having the lower rate. Very good information here, Tom. I wish I'd known about that loophole back when I could have used it! :-)

gigihawaii said...

David and I are not affected at all. We both have the same Medicare premiums. We also have Humana Medicare Advantage plans, which help us tremendously.

schmidleysscribblins.com said...

Interesting piece Tom. I wonder if you heard Rnd Paul's speech on the floor of the Senate. He was concerned that the budget deal did not include reforms to SSDI which has been abused in recent years by baby boomers finding bogus "medical" excuses to retire early. The clever, unscrupulous, and already well-off will always manage to rip off the system it seems. The bad news from Paul was that the SSDI budget was being bolstered by taking money from Social Security.

Tabor said...

This is too convoluted and too complicated for us. We all need to just have healthcare that is affordable and clear to understand!

pia said...

Single payer!

As a single person who was never married ten or more years I'm glad those loopholes were closed. It was very unfair. Single people pay more for everything---rent, mortgage or house selling price, food--no way can you buy half a cauliflower, hotel rooms--or maybe we're not supposed to go on vacation, tours if we take them.

I went on Medicare this summer. Have only used it a few times but unlike my parents I'm proud to be on it and wow--walk out of a doctor's office without paying a copay---I do the "all inclusive Plan F" so I never pay a deductible. The two Medicare Advantage plans in South Carolina aren't highly rated.

I don't plan on taking Social Security until I'm 70 unless I get sick, very sick. It just doesn't make sense and yes I feel very grateful that I can wait.

I love your blog. It's one "retirement blog," that doesn't preach at me---and I tend to agree with you on most things so...

DDD said...

Thanks for the information.
I would be eligible for the two strategies. It is good that the loopholes are closed. One could die before 70 while collecting spousals' half benefit.

Stephen Hayes said...

I agree with Tabor. Much too convoluted.

Barbara said...

The spousal issue is one of the few problems I don't have with Medicare/Social Security. If they had just saved and invested the money we put in, there would be this problem. Or would there?

Janette said...

Thank you for treading through the mind numbing information and giving us the information needed.

Tom Sightings said...

I have to admit, I'm not sure what single payer means -- is that what Medicare is? I think single payer sounds like a good idea, at least theoretically, but I don't know how it would work ... if it's remotely like the tax system it would be anything but simple and clear to understand.

Dianne, I did not hear Paul's speech. I have a friend who's a lawyer and he says they've gotten much tougher on disability claims, precisely because people were abusing it. It's clear there are clever people who either game the system or outright abuse it; but that doesn't mean we shouldn't have a system; it just means we need to tighten up enforcement a little bit. You're always going to have some waste/abuse; the key is to keep it to 1 or 2 percent, not 10 or 15 percent.

Olga Hebert said...

Yeah, what Tabor said.

Anonymous said...

Have been retired for a while it seems to me in my opinion that the pensions that both my hubs and I get seem to not go up much..also we seem to pay a lot for our medical premiums each month, I am going back to work just to pay for the health premiums, the union that my hubs belonged to switched from one place to another we got paid some did not, one must be vigilant when retired, we notice everything is higher and ssdi well my brother in law gets it and works each day, more so than most of his siblings..I think not increasing the social security was wrong many single people are on that and that is all they have at all, it is shameful congress and the senate make out like bandits indeed!!!!!!!!!!!!!!!!!!!!!!!!!

Pam said...

It's hard to make sense of social security. While visiting with two friends, I learned that the one who had stayed home to raise the kids, was able to receive half of her husband's benefit. The other friend had worked at a modest paying job for many years, and her benefit was much less than the stay-at-home-wife. Go figure. Tom, I always appreciate the light you shed on these issues.

Janette said...

The military is single payer. We turn our lives over to the system and they care for us while we are active duty. Cancer, covered. Colds, covered. Prescriptions, covered. They used to say that the benefit was in lue of more pay and estimated the benefit at $200 a month in 1982.
Down side is you cannot sue a doctor. We were ok with that. You can also not choose your doctor....but that is becoming a norm for all of us isn't it? If you still have a "family doctor" you are rare (and they probably don't have hospital privileges if you become ill outside of 20 miles from your house.)
We are somewhat covered in retirement, but only partially when we hit 65.
We have to give up something to bring the insanity into line.

Anonymous said...

You want unfair? How about the fact that the self-employed pay TWICE as much for the SAME benefit, because they pay BOTH the "employee" AND the "employer" shares of the tax that funds Social Security?

Anonymous said...

I agree with what Tabor said 100%. Thank you.

Anonymous said...

I have read that when you file your federal taxes, as a self-employed person, you get some of that tax money back. Instead of the full 15% it is more like 7 or 8%. You pay 15% quarterly, but at the end of the year you get some of that tax back. The details are fuzzy to me now, anyone else have more clarity?

Anonymous said...

question? does the increase in Medicare stay for the rest of your life, or does it go back to the lower amount once you take social security and have it deducted from it?

Tom Sightings said...

Anon., since at this point in my life I am self-employed, I agree with you completely ... it's unfair! But, to be completely fair, the employer's part of the payroll tax is a cost of employing a person, and were it not for the employer's 7% share, theoretically they'd pay more for the job.

It's true you get some of that 15% back when you file your taxes. Half of the payroll tax can be taken off gross income, so you save tax on that much ... but it's not much. Say you pay $1000 in SS tax. You can deduct $500 off your income which means, if you're in the 20% tax bracket, you get $100 back from that original payment.

Honestly, I dunno know the answer to the Medicare question. But you can always call 1-800-MEDICARE (633-4227), get thru the phone tree and ask someone.

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