Medicare’s 51.8% Part B premium will crush every state’s budget
As you may have heard the Medicare Board of Trustees in its 2015 Annual Report is calling for a 51.8 percent increase in the Medicare Part B premium. The premium is expected to jump up to $159.30 in 2016 from $104.90 in 2015.
The good news, as we pointed out in “Social Security benefits appear to be going down for just about everybody”, is that for many retirees who are receiving Social Security benefits while being enrolled in Medicare will be “held harmless” as, due to legislation, most retirees can’t not be put in the position of having their Social Security benefit lessened due to Part B premiums.
The bad news is that each individual state that provides its retired public employees health benefits are not as fortunate to be “held harmless” since the provision is only for those who are enrolled into Social Security and they will see their budgets in 2016 get decimated due to this.
Since 1991, according to the Centers of Medicare and Medicaid Services (CMS)the cost of just “Medicare/Physician & Clinical Services”, which consists of Part B as well as any agreement for coverage of Part B deductibles and excess charges, has risen by 5.5 percent.
In 1991 the average amount each state paid for just this coverage for its employees totaled just under $924 million. By 2009, the last reported year by CMS, the average amount increased to $2.4 billion. If the track remained constant at 5.5 percent through 2015 that average amount spent for employee health benefits for just Part B increased to about $3.38 billion and now, with this increase of premiums going to up by 51.8 percent the total may be more than any politician projected.
The other dagger in the budgets of these states is the fact that the other cost associated with Part B, the deductible, is also expected to increase by 51.8 percent too. In 2015 the deductible is $147.00 per incident while in 2016 the new deductible will increase to $223.00 per incident.
It should be noted that this is not an exact science as each state has varying types of agreements with its public employees, but for those states that provide full coverage the new cost in 2016, for just Part B “Medicare/Physician & Clinical Services” could exceed $5 billion on the national level.
The frightening part is that this increase may be more than a third of what was spent for full coverage on average for all public employees in 2015.
In 1991, on average, the amount spent to cover all health benefits which include services for Part A, Part B, Part D, Dental, some Home Health Care as well as Nursing Home coverage and Medical Products for those public employee’s health care totaled $3.45 billion. This cost increased, on average, by 6.6 percent through 2009 where it totaled about $10,365 billion.
At the rate of 6.6 percent this cost would have increased to $15.2 billion and in 2016 the amount that appears to be due looks to explode to over $20 billion.
President Obama is on record as stating that the increase of health costs in the future is one of our biggest threats to our national security and at the rate that we are on as a nation when it comes to planning for our health costs in retirement it appears that he is spot on.
According to the Pew Research Center in its “Widening the Gap Update” not one state is prepared for this as each state has yet to fully fund its healthcare obligation for its employees. In fact, which we reported in our “Rising interest rates and your state & local governments”, of all 50 states, not one was even close to being 80% funded and only two are above 50%. Fifteen states are in the single digits, while 19 states were at 0% and one, Nebraska is N/A when it came to funding for health costs.
There is a time bomb on the horizon and it appears to be the one thing that we all cherish: our health.
The time for planning for health costs is now and unfortunately it would appear that not one state as well as any financial firm has yet to tackle to the problem at all. NOT ONE.