For younger seniors considering their Medicare options for the first time, it can be tempting to skip Medicare Part B. This part of Medicare covers preventive care and medically necessary services other than hospitalization, which is covered by Part A.
Part B coverage will cost you $104.90 per month if you earn less than $85,000 per year (or combined $170,000 with your spouse). If you are relatively young, healthy, and rarely visit the doctor, that may seem like an unnecessary expense.
But do some calculations before you decide to leave that coverage on the table until more chronic issues rear their heads. Consider how the hold “harmless provision” will affect Part B premiums in the future. This provision has been put into place to keep Part B premiums from chipping away at your Social Security benefits.
Every year, a cost-of-living-adjustment, or COLA, is established for Social Security recipients. It is tied to the economy, so it can vary based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Let’s imagine that you earn $1,000 per month from Social Security, and the COLA for the new year is one percent. You’ll earn an additional $10 per month. But if your Medicare Part B premiums go up $12, you are now netting $2 less every month.
The hold harmless provision prevents that from happening. In this case, the Medicare Part B increase would cap out at $10, preventing a net loss in income.
This benefit doesn’t apply to higher income seniors (those over the $85,000/$170,000 threshold), or to those enrolling for the first time. If, as a young, 65 year-old retiree, you skip Part B, you will pay full price for it when you do eventually enroll. The hold harmless provision will only limit the erosion of your Social Security benefits from that point on.
You also don’t get to defer Medicare part B for free. There is a late enrollment penalty of 10 percent for each year that you delay. That’s for as long as you have Medicare, which is for the rest of your life. If you live another 20 years, which is about life expectancy, you’ll pay an amount equal to two years of full premiums for each year of premiums you thought you saved. Call it the Gotcha Factor.
Finally, let me add another variable to the equation. Medicare Part B premiums have not increased for the past two years. They are still lower than the all time high of $115.40 in 2011.
So get out your crystal ball. What do you think the future increases in Medicare Part B premiums will look like in relation to the Social Security COLAs? Will they remain low as they have the last few years? Or will we start seeing increases again?
With these numbers, does it make sense to hold off on Part B? For most people, I’m going to guess that, no, it doesn’t make sense. Sit down and do the math – my bet is you will agree.
Amy Rogers MD is not a practicing physician and nothing written here should be taken as medical advice from either Amy or AssetBuilder. Medical decisions should be made with care in consultation with your health care provider.