MEDICARE PREMIUMS AND DEDUCTIBLES FOR 2012
MEDICARE PART A:
Medicare Part A premiums will be increasing by just $1 per month, and the deductible will increase by
just $24. For Medicare Part A, which pays for inpatient hospital, skilled nursing facility, and some
home health care, about 99 percent of Medicare beneficiaries do not pay a premium since they or
their spouses have at least 40 quarters of Medicare-covered employment.
However, some enrollees age 65 and over and certain persons with disabilities who have fewer than
30 “quarters of coverage” obtain Part A coverage by paying a monthly premium set according to a
statutory formula. This premium will be $451 for 2012, an increase of $1 from 2011. Those who have
between 30 and 39 “quarters of coverage” may buy into Part A at a reduced monthly premium rate
which is $248 for 2012, the same amount as in 2011. The Part A deductible paid by a beneficiary
when admitted as a hospital inpatient will be $1,156 in 2011, an increase of $24 from this year's
$1,132 deductible. The Part A deductible is the beneficiary's cost for up to 60 days of Medicarecovered
inpatient hospital care in a benefit period. Beneficiaries must pay an additional $289 per day
for days 61 through 90 in 2012, and $578 per day for hospital stays beyond the 90th day in a benefit
period. For 2011, per day payment for days 61 through 90 was $283, and $566 for beyond 90 days.
For beneficiaries in skilled nursing facilities, the daily co-insurance for days 21 through 100 in a
benefit period will be $144.50 in 2012, compared to $141.50 in 2011.
MEDICARE PART B:
The standard Medicare Part B monthly premium will be $99.90 in 2012, a $15.50 decrease over the
2011 premium of $115.40. However, most Medicare beneficiaries were held harmless in 2011 and
paid $96.40 per month. The 2012 premium represents a $3.50 increase for them.

Medicare Part B covers a portion of the cost of physicians’ services, outpatient hospital services,
certain home health services, durable medical equipment, and other items. By law, the standard
premium is set to cover one-fourth of the average cost of Part B services incurred by beneficiaries
aged 65 and over, plus a contingency margin. The contingency margin is an amount to ensure that
Part B has sufficient assets and income to (i) cover Part B expenditures during the year, (ii) cover
incurred-but-unpaid claims costs at the end of the year, (iii) provide for possible variation between
actual and projected costs, and (iv) amortize any surplus assets. Most of the remaining Part B costs
are financed by Federal general revenues. (In 2012, about $2.9 billion in Part B expenditures will be
financed by the fees on manufacturers and importers of brand-name prescription drugs under the
Affordable Care Act.)
The largest factor affecting the contingency margin for 2012 is the current law formula for physician
fees, which will result in a payment reduction of about 29 percent in 2012. For each year from 2003
through 2011, Congress has acted to prevent smaller physician fee reductions from occurring. The
2012 reduction is almost certain to be overridden by legislation enacted after Part B financing has
been set for 2012. In recognition of the strong possibility of increases in Part B expenditures that
would result from similar legislation to override the decrease in physician fees in 2012, it is
appropriate to maintain a significantly larger Part B contingency reserve than would otherwise be
necessary. The asset level projected for the end of 2012 is adequate to accommodate this
contingency.
In 2012, Social Security monthly payments to enrollees will increase by 3.6 percent. The dollar
increase in benefit checks is expected to be large enough on average to cover the increase in the Part
B premium of $3.50 that most beneficiaries will experience. For those who were paying the standard
premium of $115.40, their benefits checks will only increase.
MEDICARE PART D:
The estimate for the average 2012 Part D premium for basic coverage is $30. This is slightly lower
than the actual average for 2011 of $30.76. The estimate for the average 2012 Part D premium for
supplemental coverage is $8. The estimate for the average 2012 total Part D premium is $38.
MEDICARE ADVANTAGE PLANS:
On average, Medicare Advantage premiums will be 4 percent lower in 2012 than in 2011, and plans
project enrollment to increase by 10 percent. Of people with Medicare, 99.7 percent continue to
enjoy access to a Medicare Advantage plan, and benefits remain consistent with those offered in
2011.
INCOME RELATED ADJUSTMENT:

As required in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003,
beginning in 2007 the Part B premium a beneficiary pays each month is based on his or her annual
income. Specifically, if a beneficiary’s “modified adjusted gross income” is greater than the legislated
threshold amounts ($85,000 in 2012 for a beneficiary filing an individual income tax return or married
and filing a separate return, and $170,000 for a beneficiary filing a joint tax return) the beneficiary is
responsible for a larger portion of the estimated total cost of Part B benefit coverage.
In addition to the standard Part B premium, affected beneficiaries must pay an income-related
monthly adjustment amount. These income-related amounts were phased-in over three years,
beginning in 2007. About 4 percent of current Part B enrollees are expected to be subject to these
higher premium amounts.
The 2012 Part B monthly premium rates to be paid by beneficiaries who file an individual tax return
(including those who are single, head of household, qualifying widow(er) with dependent child, or
married filing separately who lived apart from their spouse for the entire taxable year), or who file a
joint tax return are shown in the following table:
Beneficiaries who file an
individual tax return with
income:
Beneficiaries who file a
joint tax return with
income:
Part B incomerelated
monthly
adjustment
amount
Total monthly
Part B
premium
amount
Less than or equal to
$85,000
Less than or equal to
$170,000 $0.00 $99.90
Greater than $85,000
and less than or equal to
$107,000
Greater than $170,000
and less than or equal to
$214,000 $40.00 $139.90
Greater than $107,000
and less than or equal to
$160,000
Greater than $214,000
and less than or equal to
$320,000 $99.90 $199.80
Greater than $160,000
and less than or equal to
$214,000
Greater than $320,000
and less than or equal to
$428,000 $159.80 $259.70
Greater than $214,000 Greater than $428,000 $219.80 $319.70

In addition, the monthly premium rates to be paid by beneficiaries who are married, but file a
separate return from their spouse and lived with their spouse at any time during the taxable year are
as follows:
Beneficiaries who are married but
file a separate tax return from
their spouse:
Part B incomerelated
monthly
adjustment
amount
Total monthly
Part B
premium
amount
Less than or equal to $85,000 $0.00 $99.90
Greater than $85,000 and less
than or equal to $129,000 $159.80 $259.70
Greater than $129,000 $219.80 $319.70
As a result of the Medicare Modernization Act, the Part B deductible was increased to $110 in 2005
and is indexed thereafter by the annual percentage increase in the Part B actuarial rate for aged
beneficiaries. In 2012, the Part B deductible will be $140, a decrease of $22 from 2011. (The
actuarial rate is set by law at one-half of the total estimated per-enrollee cost of Part B benefits and
administrative expenses, adjusted as necessary to maintain an adequate contingency reserve.)
Those who enroll in Medicare Advantage plans may have different cost-sharing arrangements. On
average Medicare Advantage premiums will be 4 percent lower in 2012 than in 2011, and plans
project enrollment will increase.
Beginning in 2011, the Affordable Care Act required Part D enrollees whose incomes exceed the same
thresholds that apply to Part B enrollees to pay an income-related monthly adjustment amount, in
addition to their Part D plan premium. The 2012 income-related monthly adjustment amounts to be
paid by beneficiaries who file an individual tax return (including those who are single, head of
household, qualifying widow(er) with dependent child, or married filing separately who lived apart
from their spouse for the entire taxable year), or who file a joint tax return are shown in the following
table:
Beneficiaries who file an
individual tax return with
income:
Beneficiaries who file a
joint tax return with
income:
Incomerelated
monthly
adjustment
amount

Less than or equal to
$85,000
Less than or equal to
$170,000 $0.00
Greater than $85,000 and
less than or equal to
$107,000
Greater than $170,000
and less than or equal to
$214,000 $11.60
Greater than $107,000 and
less than or equal to
$160,000
Greater than $214,000
and less than or equal to
$320,000 $29.90
Greater than $160,000 and
less than or equal to
$214,000
Greater than $320,000
and less than or equal to
$428,000 $48.10
Greater than $214,000 Greater than $428,000 $66.40
In addition, the income-related monthly adjustment amounts to be paid by Part D beneficiaries who
are married, but file a separate return from their spouse and lived with their spouse at any time
during the taxable year are as follows:
Beneficiaries who are
married and lived with their
spouse at any time during
the year, but file a separate
tax return from their
spouse:
Incomerelated
monthly
adjustment
amount
Less than or equal to
$85,000 $0.00
Greater than $85,000 and
less than or equal to
$129,000 $48.10
Greater than $129,000 $66.40
As noted above, states have programs that pay some or all of beneficiaries' Part A and Part B
premiums and coinsurance for certain people who have Medicare and a limited income. Medicare
provides similar assistance with premiums and cost-sharing for low-income Part D enrollees.
Information is available at 1-800-MEDICARE (1-800-633-4227) and, for hearing and speech impaired,
at TTY/TDD: 1-877-486-2048.

Margaret Dick Tocknell
for HealthLeaders Media,
September 19, 2011

Enrollment will increase and premium prices will drop as health plans prepare for the upcoming open enrollment period for Medicare Advantage, officials at the Department of Health and Human Services have announced.

Look for a 10% increase in enrollment to about 13.1 million beneficiaries while premiums shrink by 4% to an average $32 per month. Medicare Advantage, private health insurance available to Medicare beneficiaries, accounts for about 25% of total Medicare enrollment.

Government officials made the obligatory nod to the Affordable Care Act as the driving force behind the news but there are a lot factors at play here, including a bigger baby boomer population that’s comfortable with managed care and the move by businesses to shift their 65 year-old and older retirees off of expensive employee -sponsored plans and onto more cost-effective Medicare Advantage plans.

"Health plans see Medicare Advantage as a stable product where they can make money,” said Dan Mendelson, CEO of Avalere Health, a Washington, D.C.-based research firm. He noted that members are using less medical care, and reduced utilization has enabled plans to drop premium prices for the Medicare Advantage products.

He explained that health plans also are "learning to work with CMS (the Centers for Medicaid & Medicare Services) as customers, which is something we don’t often see in a Democratic administration.”

In addition, health insurers are looking at Medicare Advantage as a way to increase their overall market presence especially as they look to attract a share of the important individual market.

"If an insurer has a commercial plan in an area and wants to have a stronger presence in a market then having a Medicare Advantage product can help,” said Mendelson. That visibility will be critical as insurers compete for individual business through health insurance exchanges.

Time will tell if consolidation in the Medicare Advantage market will eventually mean higher premiums for beneficiaries. With the program expected to absorb more than $130 billion in cuts between 2010 and 2020, smaller players are already finding it more difficult to remain in the market.

In addition to the enrollment and premium news, HHS officials announced that in 2012 CMS will provide financial rewards to Medicare Advantage plans with high quality scores, under its five-star rating program. An estimated $6.7 billion is earmarked for the program. CMS will allow five-star Medicare Advantage and Part D plans to continuously market and enroll beneficiaries throughout the year, as an extra incentive for high quality performance.

"Plans that do a better job serving the needs of their Medicare members should be rewarded and all plans should be encouraged to improve their performance,” said Jonathan Blum, CMS deputy administrator and director of the Center for Medicare in a press statement.

Open enrollment begins on October 15th and ends seven weeks later on December 7th.

Great tool for use by business owners of 25 employees or less to calculate the small business tax credit for group health insurance.

 

Brought to you by Blue Cross Blue Shield of MI and H&R Block,

 

http://www.bcbsm.com/grow/taxcalculator.shtml

Health insurance tax deduction for the self-employed
On Sept. 27, 2010 the Small Business Jobs Act was signed into law providing a new tax deduction
for self-employed individuals who purchase their own health insurance. The provision, which is expected to affect up to two million small business owners, may provide a deduction when calculating their self-employment taxes. The provision is estimated to provide over $1.9 billion in tax cuts to these entrepreneurs.¹
.
According to Wayne Nelson, president of Communicating for America, Inc. (CA), the fix is only good for the 2010 tax year but CA and other groups are working on making it permanent next year. It could mean an additional 15 percent tax savings when deducting your health insurance premium.

I wanted to write my readers to let them know of a event coming up on November 19th called "2010 Health Care Summit".  The main issue being discussed is the Federal Health Care Reform and Critical Business Issues You Need to Know.  This is going to be a great outlet for questions and answers as the CEO fo the National Assoc of Health Underwriters will be speaking, and Rick Albin from WOOD TV8 will be moderator for the panel discussion.

Check out grandrapids.org or find out more info and to register for the event. 

As the Health Care Reform bills leave Congress and are enacted into law, the impact of these sweeping changes will be felt by pretty much everyone in this country.  The words are on paper and now it is time to translate what it means. 

We have seen, already, over the past four days changes in how the laws are going to be translated to real life.

Timlines are being set, and we are working 7 days a week right now to keep on top of changes, how they can benefit our clients, and making Prime Insurance Service the go to experts when it comes to easy transitions for our clients over the next weeks, months and years as we fully implement the changes that are coming.

Keep up to date real time!!  News and information on health insurance, life insurance, dental insurance and Medicare!!

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