2025 Medicare Part B Premium Hike Exceeds Social Security COLA, Inflation

livewell
November 15, 2024
Noah Bennett

Introduction

CMS (Centers for Medicare and Medicaid Services) has announced a hike in Medicare Part B premium for 2025. According to the announcement, American seniors will pay 6% more premiums for the Part B plan in the coming year compared to last year. This may affect millions in the next year.

Medicare Part B

Part B is one of the two parts comprising Original Medicare. It covers outpatient care, doctor visits, home healthcare, medical equipment, vaccines, etc. The second part is Medicare Part A which covers inpatient care in Medicare-approved hospitals and other medical facilities. Unlike Part B, Medicare Part A is premium-free for almost all beneficiaries due to their tax payments during their job before retirement.

Medicare Part B Premium for 2025

CMS has revised the standard monthly premiums for 2025 with an increase of about 6% or $10.30. Compared to the previous minimum premiums of $174.70 in 2024, the affected members will now pay $185 in 2025. The additional 2025 healthcare costs are not just limited to monthly premiums but also includes annual deductibles. For Medicare Part B beneficiaries, it will rise to $257 in 2025 compared to $240 in 2024.

The factors that determine this increase are the change in projected price and the increase in utilization of commodities. In recent years, the cost rarely fell and one such instance was seen in 2023 when it reduced to $164.90, $5 less than the previous year.

Comparison to Social Security COLA 2025

Medicare premium increase generally happen due to inflation impact on Medicare. Medicare monthly premiums typically exceed inflation and COLA (cost-of-living adjustment). It is happening this year as well. In September 2024, the yearly inflation rose by 204%, while the Social Security COLA will be 2.5% for the next year. It means 2025 Medicare monthly premiums have increased more than double these parameters.

Medicare Payments for Higher-income Enrollees

Medicare Part B monthly premiums are different for people with higher incomes, and wealthy Americans pay considerably more than average premiums. This is called IRMAA (income-related monthly adjustment amount). According to estimates, this affects nearly 8% of the Part B enrollees.

Medicare beneficiaries with an annual income of $106,000 or less will pay the standard monthly premium of $185 for 2025.
Seniors with income above 106,000 but below 394,000 will pay an IRMAA of $406.90. It will increase their monthly premiums to $591.90 per month.
The IRMAA for members with incomes above $394,000 is 443.90, raising their monthly premiums to $628.90.

Impact on Social Security Benefit Payments

Many Part B enrollees also receive Social Security benefits, and their monthly Medicare Part B premium is automatically deducted from their Social Security. According to the increase in Medicare Part B monthly premiums, they can expect further deductions in the year 2025.

Other members who do not receive Social Security are required to pay monthly premiums directly through their bank, mail, or bills. They must make adjustments for 2025 monthly premiums according to the new Medicare Part B rate hike.