State Medicaid agencies are bracing for hundreds of millions in new obligations thanks to a significant increase in Medicare premiums.
This past summer, the 2015 Medicare Trustees Report projected Part B premiums would increase by 52%—up to $159.30 a month from $104.90.
However, most Medicare beneficiaries will be spared as roughly 70% pay their Part B premiums through deductions from their Social Security benefit payments. A policy called “hold harmless” shields beneficiaries from any premium hikes that outpace cost-of-living increases.
This policy ensures that Social Security check amounts will not decline from one year to the next because of increases in Medicare Part B premiums.
Not protected from the premium increase are those who do not pay their Part B premiums through deductions from their Social Security benefit payments. This group includes those who are newly enrolled in Medicare and individuals dually eligible for Medicaid.
“Since dually eligible beneficiaries themselves do not pay the Part B premium out of their own pocket, the additional cost would fall directly on the states,” said Juliette Cubanski, associate director of the Program on Medicare Policy at the Kaiser Family Foundation. “If the actual increase is anywhere in line with the projected increase, it could be a pretty big impact in terms of the additional premium costs that states would bear.”
HHS sets Part B premiums every fall, and they are expected to be released this month.
It's only been in recent weeks that states have begun to put two and two together and realized what the projected premium hike would mean for their bottom lines. And they are very concerned, said Matt Salo, executive director of the National Association of Medicaid Directors.
“This is one of those sleeper issues that kind of snuck up on everybody,” Salo said.
He personally expressed frustration on the projected increase, calling it an “attempt to keep Medicare solvent by billing Medicaid.”
California is calling the premium hikes an "urgent fiscal issue" and sent a letter to Congress last week asking it to act as the state faces $550 million in new costs.
Other states are reacting similarly.
“This unforeseen increase literally shocked us,” said Tom Shanahan, spokesman for the Idaho Department of Health and Welfare, which estimates it will incur nearly $20 million in additional Part B premium and deductible costs.
Medicare Part B premium increases are nothing new, but states say they've never seen anything like this.
“An annual increase in the Part B Premium is included in Texas Medicaid cost projections, but not of the magnitude that the CMS has under consideration,” said Bryan Black, a spokesman for Texas' Health and Human Services Commission. The state is projecting as much as $80 million in new costs as a result of the hike.
A spokesman from Virginia's Department of Medical Assistance Services echoed similar concerns and said his agency projects new costs of more than $66 million.
For duals with incomes above 120% of the federal poverty level, states pay for Medicare part B premiums via a block grant program called the Qualified Individual program. Last month, Arizona officials informed the CMS that it would deny any new applications from a qualifying dually eligible enrollee wishing to have his premiums paid for under the program.
“The state is at significant financial risk if it cannot establish an appropriate budget and manage enrollment to that budget,” according to the letter. “Therefore, (Arizona) intends to begin denying applications.… If the state does not take this action now, it runs the risk that it will be responsible for the cost of those premiums.”
Without the QI program, people will be required to pay the full Medicare Part B premium, which they will likely be unable to do given their income, Salo said.
So far, no other states have spoken about capping QI enrollment, Salo said.
Even duals who don't get their premiums paid for through the QI program could be hurt by the projected increases.
“An increase of this magnitude to Part B premiums costs may lead to states either decreasing Medicaid payments to health plans for dual eligibles, or may act as a disincentive for states to enroll people who stand to benefit from the program,” said Meg Murray, CEO of the Association for Community Affiliated Plans.
The CMS says its hands are tied and it would take an act of Congress to avoid the premium increases. “The law does not give HHS the authority to extend the hold harmless provision to all Part B enrollees,” a spokesman said.
A Democratic bill that would significantly diminish but not totally wipe out the increases is circling the Hill, but House Minority Leader Nancy Pelosi (D-Calif.) has said negotiations with House Speaker John Boehner (R-Ohio) have stalled.
Boehner reportedly is interested only in a bill that will have a pay for to avoid the premium hike. The cost of avoiding such big premium increases is as much as $7.5 billion, according to some estimates.
The White House is also looking for a way to address the issue.
“We share the goal of keeping Medicare's premiums affordable, are exploring all options,” Katie Hill, a White House spokeswoman.
If action isn't taken by Congress to avoid the increase, patient access to care will likely suffer, stakeholders say.
“We are concerned that if the increases are finalized, Medicaid budgets will be stretched too thin, which could lead to a limiting of services,” said Jennifer Goldberg, directing attorney of the health team at Justice in Aging, a patient advocacy organization.