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Medicare Increase – Are you a 30 percenter?

Fixed income recipients may see substantial changes to their “net” take home of Social Security benefits in 2016. Social Security benefits are not likely to see a cost-of-living adjustment (COLA) for 2016 due to stagnant inflation during the year, but Medicare Part B premiums are scheduled to increase around 16%.

If you have already been receiving benefits, and are under the MAGI (modified adjusted gross income) threshold of $85,000 for singles and $170,000 for married, then you should not see an increase in your Part B premiums of $104.90 per month in 2015. This is due to a “hold harmless” provision that is designed to keep recipients’ net Social Security benefits from shrinking. This provision states that an increase in premiums cannot be more than the COLA for the year. Since there will be no COLA for 2016, your premiums cannot increase. This includes about 70% of all recipients.

But what about the other 30% of recipients? There are three questions that need to be asked:

  1. Is 2016 your first year eligible for Medicare?
  2. Did you choose to “File & Suspend” your Social Security benefits until age 70, and are not yet collecting benefits?
  3. Are you over the threshold of $85,000 for singles and $170,000 for married individuals?

If you answered “Yes” to any of these questions, chances are likely that your Medicare Part B premiums will increase in 2016. This is because only individuals under the MAGI threshold who have begun collecting benefits prior to 2016 are protected under the “hold harmless” provision. The remaining 30% of recipients will bare the costs of the increase. Click here for  an officially released table from the Centers for Medicare & Medicaid Services(CMS) for the anticipated increase of Part B premiums for 2016 for those not protected by the “hold harmless” provision.

So, for those unlucky individuals who fall into these categories, be prepared for a reduction of “net” Social Security benefits in 2016 and forward.

MAGI Simple Calculation = AGI + passive losses – passive income +non-taxable interest.



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