The majority of senior citizens will see an increase in deductibles and the cost of Medicare premiums in 2017. This will effectively negate the 0.3% cost of living adjustment (COLA) that they will get from their Social Security benefits and draw still more money out of the pockets of retirees. Those who are on Medicare should start adjusting their budgets to accommodate the higher cost as soon as possible. (For more, see: How Does Medicare Work After Retirement?)

The New Numbers

The premiums for Part B of Medicare, which covers the cost of doctor’s visits and other medical services will rise to $109 a month in 2017, up from its previous four-year level cost of $104.50. This price hike will apply about seven out of every 10 retirees, who are protected by a “hold harmless” provision that mandates that Medicare B premiums cannot increase more than the rise in the previous year's cost of living adjustment for Social Security benefits.

But the premiums for the other 30% of retirees will jump from $121.80 to $134 per month, a 10% increase. Unfortunately, the “hold harmless” provision applies only to Medicare participants who are also receiving Social Security benefits. Those who are enrolled in Medicare Part B for the first time are excluded, as are those who are eligible for both Medicare and Medicaid. Those whose Medicare premiums are higher because their incomes exceed $85,000 for individuals or $170,000 for couples filing jointly are likewise barred from receiving this protection. (For more, see: Medicare 101: Do You Need All 4 Parts?)

The hike in Medicare premiums isn’t the only bad news for plan participants. The Center for Medicare and Medicaid Services also announced that the premiums for all Medicare Part B beneficiaries and for Medicare Part A in-patient hospital costs will rise in 2017. The deductible for Medicare Part B will increase by 10%, from $166 to $183, and the deductible for Medicare Part A will rise by 2% from $1,288 to $1,316.

Furthermore, the coinsurance amounts for the 61st through the 90th day will also increase by 2%, from $322 to $329. Beneficiaries who receive skilled care in a nursing home facility will see their coinsurance payments rise from $161 per day to $164.50 for days 21 through 100. (For more, see: Medigap vs. Medicare Advantage: Which Is Better?)

 “These increases illustrate how rising health care costs erode Americans' retirement income, and why it is critical to plan ahead,” Cathy Weatherford, the CEO of the Insured Retirement Institute, said  in the wake of the price increases. CMS Acting Administrator Andy Slavitt also stated that CMS will “continue our efforts to improve affordability, access, and quality in Medicare” in keeping with the program’s “top priority is to ensure that beneficiaries have affordable access to the care they need.” (For more, see: How Medicare Open Enrollment Choices Can Affect Retirement.)

The Bottom Line

The price hikes of the premiums and deductibles will undoubtedly make it harder for many seniors to pay their medical expenses, especially since the increase far outpaces the meager COLA adjustment that they will receive from Social Security. The COLA for Social Security in 2017 is one of the lowest ever, with the average retiree receiving a meager $5 more per month and the average couple receiving $6 more. Retirees who are on Medicare need to start adjusting their budgets now to accommodate the higher costs. Meanwhile, the cost of healthcare continues to rise.  (For more, see: 4 Medicare Open Enrollment Mistakes to Avoid.)

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