Big Increases in Part B Medicare Premiums Will Remain Until 2023

On May 27, the Centers for Medicare & Medicaid Services (CMS) said it would not change Part B premiums this year, even though half of the financial justification for its whopping 14.5 percent increase in 2022 premiums has not materialized. It did say it expected 2023 premiums to decline, but in the meantime, Medicare beneficiaries must continue paying the higher premiums.

The agency based its decision on a long-awaited report that concluded that changing Part B premiums prior to next year would be impractical and that the agency has no rules or process for anything other than annual changes to Medicare premiums.

Last fall, when the 2022 increases were announced, CMS said half of the expected rise was an insurance policy of sorts against the possibility that Adulhelm, an expensive new dementia drug, would lead to huge increases in Part B spending. The drug must be administered by licensed caregivers and thus is covered under Part B and not Part D of Medicare, which covers prescription drugs. Part B covers doctors, medical equipment, and other outpatient expenses.

The 2022 monthly Part B premium rose by $21.60, or nearly 15 percent, to $170.10 from $148.50 in 2021. It was more than double the projected $10 boost included in the annual report from Medicare program trustees that was released last August.

At the time, CMS said, “Depending on utilization, the potential costs for this course of treatment range from negligible to very significant. To ensure that Part B is able to pay claims in full and on time, the Part B financing must be sufficient to provide for a realistic high-cost scenario of Aduhelm coverage. The contingency margin has been increased to accommodate this risk.”

It has spent much of the past six months defending itself against criticism of the increase.

The rationale for basing a large part of its 2022 premium increases on possible Adulheim claims began crumbling even before the end of last year.

On Dec. 20, Adulhelm’s manufacturer, Biogen, said it would halve the drug’s annual price from $56,000 to $28,200. Many Medicare organizations urged CMS then to reduce Part B premiums. In response, on January 10, Xavier Becerra, head of the U.S. Department of Health & Human Services, asked CMS to reassess the amount of the Part B premium increase.

Later, in April, CMS issued what’s called a national coverage determination that said coverage of Aduhelm would be sharply limited to its use in clinical trials.

Becerra had earlier signaled that 2022 Medicare Part B premiums could be cut if Medicare later decided to limit coverage of the drug. “Once we have that determination, we’ll be able to fully assess what impact Aduhelm may have had on premiums for seniors in Medicare,” Becerra was quoted in a STAT story. “We’re gonna make sure that seniors don’t pay more than they have to.”

That position disappeared Friday. In its report and an accompanying press release, CMS used a lot of spin to cast its decision in the most favorable light. The fact that it announced the action on the Friday afternoon before the long Memorial Day weekend was a clear sign that it wanted to minimize attention to what is sure to be an unpopular decision.

At the very least, much of the rationale for not changing premiums should have been known to agency officials without needing the political cover of a formal study of the matter.

(This story is one of 135 pieces about Medicare, Social Security and aging that I regularly update and which can be found on my web site, www.getwhatsyours.org. Paying subscribers will receive a password to access these stories, other blog posts, information about my books, and links to hundreds of pieces I’ve written for the PBS NewsHour, Money Magazine, and U.S. News & World Report.)

Here are the self-serving highlights from the CMS press office. These are quotes from the release:

Given the information available today, it is expected that the 2023 premium will be lower than 2022. The final determination will be made later this fall.

The Biden-Harris Administration remains committed to lowering health care costs for beneficiaries by increasing price transparency, lowering the cost of prescription drugs, and connecting people to savings programs.”

Despite the increase, most people with Medicare saw a significant net increase in Social Security benefits due to a higher-than-usual Cost of Living Adjustment (COLA) in 2022.

Here is the report’s explanation of the agency’s decision. Again, these are quotes from the report:

The Part B premium has never been redetermined; rather, the statute requires that the determination of the premium be made for the entire succeeding year and does not explicitly include a basis for a redetermination.

Any additional funding caused by including the uncertainty of potential Aduhelm costs in the 2022 premium will be used to reduce the necessary financing in 2023 and later.

It is also worth noting that administering a redetermination of the 2022 Part B premium would be extremely burdensome. These complications, such as reprogramming the Social Security Administration systems, would take a significant amount of time and other resources, as described in greater detail elsewhere.

CMS found that incorporating the premium effects of Aduhelm’s price reduction and the subsequent National Coverage Determination into the 2023 premium is the only practically feasible option, as implementing a mid-year administrative redetermination of the 2022 premium was not found to be operationally possible during 2022, and also determined CMS does not have sufficient authority to send premium refunds directly to beneficiaries unless there is excess payment relative to the established premium.

The premium for each Medicare beneficiary is determined based on individual factors such as date of enrollment, requirements to pay penalties for late enrollment, income, disability status, the hold harmless provision, dual eligibility for Medicare and Medicaid, premium assistance, and other factors. For some beneficiaries, these factors change throughout year. CMS maintains files on beneficiary enrollment but relies on other entities to calculate, collect, and pay premiums, and update the base premium annually. The processes required for a mid-year change exceed the tested capabilities of some of these involved entities and were estimated to stretch late into 2022 if not early 2023, thus practically invalidating the benefit of setting a new premium mid-year. This timeline also risked disrupting the smooth implementation of the 2023 Part B premium.

A mid-year redetermination would also require a corresponding update to the Part B deductible, as the Part B deductible amount is linked to the amount of the Part B Premium. Such a change would require the retroactive reprocessing of millions of claims, which would take over a year and additional resources to complete as well as the attempted reimbursement of beneficiaries for past cost sharing through their health care providers.

Philip Moeller is the principal author of the Get What’s Yours series of books about Social Security, Medicare, and health care. @PhilMoeller