Medicare Part B: Enrollment and Premiums June 15, 2021 Medicare is a federal insurance program that pays for covered health care services of most individuals aged 65 and older and certain disabled persons. In calendar year 2020, 2021, Patricia A. Davis the program is expected to cover about 63 million persons (54 million aged and 9 million disabled) at a total cost of $862 billion. 64 mil ion persons at a total cost of $922 bil ion. Specialist in Health Care Most individuals (or their spouses) aged 65 and older who have worked in covered Financing employment and paid Medicare payroll taxes for 40 quarters receive premium-free Medicare Part A (Hospital Insurance). Those entitled to Medicare Part A (regardless of whether they are eligible for premium-free Part A) have the option of enrolling in Part B, which covers such things as physician and outpatient services and medical equipment.

Beneficiaries have a seven-month initial enrollment period, and those who enroll in Part B after this initial enrollment period and/or reenroll after a termination of coverage may be subject to a late--enrollment penalty. This penalty is equal to a 10% surcharge for each 12 months of delay in enrollment and/or reenrollment. Under certain c ertain conditions, some beneficiaries are exempt from the late-enrollment penalty; these exempt beneficiaries include working individuals (and their spouses) with group coverage through their current employment, some international volunteers, and those granted "“equitable relief."

” Whereas Part A is financed primarily by payroll taxes paid by current workers, Part B is financed through a combination of beneficiary premiums and federal general revenues. The standard Part B premiums are set to cover 25% of projected average per capita Part B program costs for the aged, with federal general revenues accounting for the remaining amount. In general, if projected Part B costs increase or decrease, the premium rises or fal sor falls proportionately. However, some Part B enrolleesenrol ees are protected by a provision in the Social Security Act (the hold-harmless provision) that prevents their Medicare Part B premiums from increasing more than the annual increase in their Social Security benefit payments. This protection does not apply to four main groups of beneficiaries: low-income beneficiaries whose Part B premiums are paid by the Medicaid program; high-income beneficiaries who are subject to income-related Part B premiums; those whose Medicare premiums are not deducted from Social Security benefits; and new Medicare and Social Security enrollees.

Most Part B participants must pay monthly premiums, which do not vary with a beneficiary'’s age, health status, or place of residence. However, since 2007, higher-income enrollees pay higher premiums to cover a higher percentage of Part B costs ("“income-related monthly adjustment amounts"” (IRMAA)). AdditionallyAdditional y, certain low-income beneficiaries may qualify for Medicare cost-sharing and/or premium assistance from Medicaid through a Medicare Savings Program. The premiums of those receiving benefits through Social Security are deducted from their monthly payments.

Each year, the Centers for Medicare & Medicaid Services (CMS) determines the Medicare Part B premiums for the following year. The standard monthly Part B premium for 2020 is $144.602021 is $148.50. However, in 20202021, the hold-harmless provision applies to someabout 2% of Part B enrollees, and these individuals pay lower premiums. (The premiums of those held harmless vary depending on the dollar amount of the increase in their Social Security benefits.) Higher-income beneficiaries, currently defined as individuals with incomes over $8788,000 per year or couples with incomes over $174176,000 per year, pay $202.40, $289.20, $376.00, $462.70, or $491.60207.90, $297.00, $386.10, $475.20, or $504.90 per month, depending on their income levels. Current issues related to the Part B premium that may come before Congress include the amount of the premium and its rate of increase (and the potential net impact on Social Security benefits), the impact of the hold-harmless provision on those not held harmless, modifications to the late-enrollment penalty, and possible increases in Medicare premiums as a means to reduce federal spending and deficits. Congressional Research Service link to page 5 link to page 7 link to page 8 link to page 9 link to page 10 link to page 12 link to page 13 link to page 14 link to page 14 link to page 15 link to page 15 link to page 17 link to page 17 link to page 18 link to page 19 link to page 20 link to page 21 link to page 21 link to page 22 link to page 23 link to page 25 link to page 27 link to page 27 link to page 28 link to page 28 link to page 29 link to page 30 link to page 32 link to page 32 link to page 32 link to page 34 link to page 34 link to page 35 link to page 36 link to page 38 link to page 38 link to page 38 link to page 38 link to page 39 link to page 39 Medicare Part B: Enrollment and Premiums Contents Introduction ................................................................................................................... 1 Medicare Part B Eligibility and Enrollment ......................................................................... 3 Initial Enrollment Periods ........................................................................................... 4 General Enrollment Period .......................................................................................... 5 Special Enrollment Periods ......................................................................................... 6 Late-Enrollment Premium Penalty and Exemptions .............................................................. 8 Calculation of Penalty ................................................................................................ 9 Penalty Exemptions ................................................................................................. 10 Current Workers ................................................................................................. 10 International Volunteers....................................................................................... 11 Equitable Relief ................................................................................................. 11 Collection of the Part B Premium .................................................................................... 13 Deduction of Part B Premiums from Social Security Checks .......................................... 13 Part B Enrollees Who Do Not Receive Social Security Benefits ...................................... 14 Determining the Part B Premium ..................................................................................... 15 Premium Calculation for 2021 ................................................................................... 16 Contingency Margin ................................................................................................ 17 Income-Related Premiums.............................................................................................. 17 Determination of Income .......................................................................................... 18 Income Categories and Premium Adjustments.............................................................. 19 Legislative Changes to Income Thresholds .................................................................. 21 Premium Assistance for Low-Income Beneficiaries ............................................................ 23 Qualified Medicare Beneficiaries ............................................................................... 23 Specified Low-Income Medicare Beneficiaries ............................................................ 24 Qualifying Individuals.............................................................................................. 24 Protection of Social Security Benefits from Increases in Medicare Part B Premiums................ 25 Some Beneficiaries Are Not Protected by the Hold-Harmless Provision ........................... 26 Application of the Hold-Harmless Rule in 2021 ........................................................... 28 Potential Application of the Hold-Harmless Rule in 2022 .............................................. 28 Part B Premiums over Time ............................................................................................ 28 Current Issues............................................................................................................... 30 Premium Amount and Annual Increases ...................................................................... 30 Impact of the Hold-Harmless Provision on Those Not Held Harmless .............................. 31 Proposals to Modify the Late-Enrollment Penalty ......................................................... 32 Deficit Reduction Proposals ...................................................................................... 34 Increasing Medicare Premiums............................................................................. 34 Impose a Part B Premium Surcharge for Beneficiaries in Medigap Plans with Near First-Dollar Coverage ............................................................................... 34 Limit Federal Subsidies ....................................................................................... 35 Considerations ................................................................................................... 35 Congressional Research Service link to page 34 link to page 9 link to page 24 link to page 25 link to page 25 link to page 26 link to page 29 link to page 42 link to page 45 link to page 45 link to page 47 link to page 47 link to page 48 link to page 40 link to page 45 link to page 45 link to page 48 link to page 49 link to page 51 link to page 55 link to page 56 Medicare Part B: Enrollment and Premiums Figures Figure 1. Monthly Medicare Part B Premiums ................................................................... 30 Tables Table 1. Initial Enrollment Period ...................................................................................... 5 Table 2. Monthly Medicare Part B Premiums for 2021 ........................................................ 20 Table 3. Part B Premium Adjustment for Married Beneficiaries Filing Separately for 2021 .................................................................................................................... 21 Table 4. Changes to the Medicare High-Income Premium Thresholds: 2017 to 2020................ 22 Table 5. 2021 Medicare Savings Program Eligibility Standards ............................................ 25 Table A-1. Monthly Part B Premiums, 1966-2020 .............................................................. 38 Table B-1. Income Levels for Determining Part B Premium Adjustment and Per Person Premium Amounts, 2007-2021 ..................................................................................... 41 Table B-2. Income Levels for Determining Part B Premium Adjustment for Married Beneficiaries Filing Separately and Associated Premiums, 2007-2021 ................................ 43 Table C-1. Projected Part B Premiums.............................................................................. 44 Appendixes Appendix A. History of the Part B Premium Statutory Policy and Legislative Authority ........... 36 Appendix B. Standard and High-Income Part B Premiums and Income Thresholds: 2007- 2021......................................................................................................................... 41 Appendix C. Estimated Future Part B Premiums ................................................................ 44 Appendix D. Bipartisan Budget Act of 2015 Changes to 2016 Part B Premiums ..................... 45 Appendix E. Application of the Hold-Harmless Provision in Years Prior to 2021 .................... 47 Appendix F. Part A Premiums ......................................................................................... 51 Contacts Author Information ....................................................................................................... 52 Congressional Research Service Medicare Part B: Enrollment and Premiums Introduction Medicare is a federal insurance program that pays for covered health care services of most individuals depending on their income levels.

Medicare is a federal insurance program that pays for covered health care services of most individuals aged 65 and older and certain disabled persons. Medicare serves approximately one in six Americans and virtually all virtual y al of the population aged 65 and over. In calendar year (CY) 2020, 2021, the program is expected to cover about 63 million persons (54 million aged and 9 million disabled)64 mil ion persons at a total cost of about $862 billion, 922 bil ion, accounting for approximately 3.94% of gross domestic product.¹1 The Medicare program is administered by the Centers for Medicare & Medicaid Services (CMS) within the Department of Health and Human Services (HHS), and individuals enroll in Medicare through the Social Security Administration (SSA).

Medicare consists of four parts—Parts A through D. Part A covers hospital services, skilled skil ed nursing facility services, home health visits, and hospice services. Part B covers a broad range of medical services and supplies, including physician services, laboratory services, durable medical equipment, and outpatient hospital services. Enrollment in Part B is voluntary; however, most Medicare beneficiaries (about 91%) are enrolled in Part B. Part C (Medicare Advantage) provides private plan options, such as managed care, for beneficiaries who are enrolled in both Part A and Part B. Part D provides optional outpatient prescription drug coverage.²

2 Each part of Medicare is funded differently.³3 Part A is financed primarily through payroll taxes imposed on current workers (2.9% of earnings, shared equallyequal y between employers and workers), which are credited to the Hospital Insurance (HI) Trust Fund. Beginning in 2013, workers with annual wages over $200,000 for single tax filers or $250,000 for joint filers pay an additional 0.9%.4 Beneficiaries general y0.9%.⁴ Beneficiaries generally do not pay premiums for Part A. In 20202021, total Part A expenditures are expected to reach about $351 billion372 bil ion, representing about 4140% of program costs.⁵ 5 Parts B and D, the voluntary portions, are funded through the Supplementary Medical Insurance (SMI) Trust Fund, which is financed primarily by general revenues (transfers from the U.S. Treasury) and premiums paid by enrollees. In 20202021, about $2.8 billionbil ion in fees on manufacturers and importers of brand-name prescription drugs also will wil be used to supplement the SMI Trust Fund.⁶6 In 20202021, Part B expenditures are expected to reach about $404 billion434 bil ion, and Part D expenditures are expected to reach about $107 billion116 bil ion, representing about 47% and 1213% of program costs, respectively. (Part C is financed proportionately through the HI and SMI Trust Funds; expenditures for Parts A and B services provided under Part C are included in the above expenditure figures.)

Part B beneficiary premiums are normally 1 Expenditure estimates from Boards of T rustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance T rust Funds, 2020 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplem entary Medical Insurance Trust Funds, April 22, 2020, at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-T rends-and-Reports/ReportsTrustFunds/index.html. (Hereinafter, 2020 Medicare T rustees Report.) T hese projections do not take into account the potential effects of the Coronavirus Disease 2019 (COVID-19) public health emergency. 2 For additional information on the Medicare program, see CRS Report R40425, Medicare Primer. 3 See CRS Report R43122, Medicare Financial Status: In Brief. 4 See Internal Revenue Service, Questions and Answers for the Additional Medicare Tax, at http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Questions-and-Answers-for-the-Additional-Medicare-T ax. 5 All expenditure data are from the 2020 Medicare T rustees Report. T he estimates do not reflect the potential impact of the COVID-19 pandemic on Medicare spending or the impact of related legislation enacted since the time of that report. 6 Centers for Medicare & Medicaid Services (CMS), “Medicare Program: Medicare Part B Monthly Actuarial Rates, Premium Rate, and Annual Deductible Beginning January 1, 2021,” 85 Federal Register 71904, November 12, 2020. Congressional Research Service 1 link to page 51 link to page 21 link to page 27 link to page 29 link to page 29 Medicare Part B: Enrollment and Premiums Part B beneficiary premiums are normal y set at a rate each year equal to 25% of average expected per capita Part B program costs for the aged for the year.⁷7 Higher-income enrollees pay higher premiums set to cover a greater percentage of Part B costs,⁸8 while those with low incomes may qualify for premium assistance through one of several Medicare Savings Programs administered by Medicaid.⁹9 Individuals who receive Social Security or Railroad Retirement Board (RRB) retirement or disability benefits have their Part B premiums automaticallyautomatical y deducted from their benefit checks. Part B premiums are generallygeneral y announced in the fall fal prior to the year that they are in effect (e.g., the 20202021 Part B premiums were announced in November 2019).¹⁰

In 20202020).10 In 2021, the standard monthly Part B premium is $144.60.¹¹148.50.11 However, in 20202021, about 32% of Part B enrollees are protected by a hold-harmless provision in the Social Security Act that prevents their Medicare Part B premiums from increasing more than the annual dollar amount of the increase in their Social Security benefit payments. These individuals pay premiums of less than $144.60.¹²

with Joint Tax Return with Monthly Income: Income: Premium Less than or equal to $88,000 Less than or equal to $176,000 $148.50 Greater than $88,000 and less than or Greater than $176,000 and less equal to $111,000 than or equal to $222,000 207.90 Greater than $111,000 and less than Greater than $222,000 and less or equal to $138,000 than or equal to $276,000 297.00 Greater than $138,000 and less than Greater than $276,000 and less or equal to $165,000 than or equal to $330,000 386.10 Greater than $165,000 and less than Greater than $330,000 and less $500,000 than $750,000 475.20 Greater than or equal to Greater than or equal to $500,000 $750,000 504.90 Source: Centers for Medicare & Medicaid Services (CMS), Fact Sheet, “2021 Medicare Parts A & B Premiums and Deductibles,” November 6, 2020. In addition to premiums, Part B beneficiaries may pay other out-of-pocket costs when they use services. The annual deductible for Part B services is $198203.00 in 2020.¹³2021.13 After the annual 7 In 2021, beneficiary premiums are expected to cover about 15.0% of the costs of “traditional” Medicare (Parts A and B combined), 14.5% from Part B premiums, and 0.6% from voluntary Part A premiums. See Appe ndix E for information on Part A premiums. 8 Depending on their income, beneficiaries subject to income-related monthly adjustments pay a total monthly premium of 35%, 50%, 65%, 80%, or 85% of expected per capita Part B costs for the aged. See “ Income-Related Premium.” 9 See “Premium Assistance for Low-Income Beneficiaries.” 10 CMS, Fact Sheet, “2021 Medicare Parts A & B Premiums and Deductibles,” November 6, 2020, at https://www.cms.gov/newsroom/fact-sheets/2021-medicare-parts-b-premiums-and-deductibles. 11 CMS, “Medicare Program: Medicare Part B Monthly Actuarial Rates, Premium Rate, and Annual Deductible Beginning January 1, 2021,” 85 Federal Register 71904, November 12, 2020, at https://www.federalregister.gov/documents/2020/11/12/2020-25029/medicare-program-medicare-part-b-monthly-actuarial-rates-premium-rates-and-annual-deductible. 12 Data provided by CMS, May 2021. T he premiums of those held harmless vary depending on the dollar amount of the increase in their Social Security benefits. See “ Protection of Social Security Benefits from Increases in Medicare Part B Premiums.” 13 Annual increases in the deductibles are not protected by the hold-harmless provision. Congressional Research Service 2 link to page 51 Medicare Part B: Enrollment and Premiums After the annual deductible is met, beneficiaries are responsible for coinsurance costs, which are generallygeneral y 20% of Medicare-approved Part B expenses.

This report provides an overview of Medicare Part B premiums, including information on Part B eligibility eligibility and enrollment, late-enrollment penalties, collection of premiums, determination of annual premium amounts, premiums for high-income enrolleesenrol ees, premium assistance for low-income enrollees, protections for Social Security recipients from rising Part B premiums, and historical Medicare Part B premium trends. This report also provides a summary of various premium-related issues that may be of interest to Congress. Specific Medicare and Social Security publications and other resources for beneficiaries, and those who provide assistance to them, are cited where appropriate.

Medicare Part B Eligibility and Enrollment

An individual (or the spouse of an individual) who has worked in covered employment and paid Medicare payroll taxes for 40 quarters is entitled to receive premium-free Medicare Part A benefits upon reaching the age of 65.14 Those who have paid in for fewer than 40 quarters may enroll in Medicare Part A by paying a premium.¹⁴ All 15 Al persons entitled to Part A (regardless of whether they are eligible for premium-free Part A) are also entitled to enroll in Part B. An aged person not entitled to Part A may enroll in Part B if he or she is aged 65 or over and either a U.S. citizen or an alien lawfully admitted for permanent residence who has resided in the United States continuously for the immediately preceding five years.

Those who are receiving Social Security or RRB benefits are automaticallyautomatical y enrolled in Medicare, and coverage begins the first day of the month they turn 65.¹⁵16 These individuals will wil receive a Medicare card and a "“Welcome to Medicare"” package about three months before their 65^th birthday.¹⁶65th birthday.17 Those who are automaticallyautomatical y enrolled in Medicare Part A also are automatically automatical y enrolled in Part B.¹⁷18 However, because beneficiaries must pay a premium for Part B coverage, they have the option of turning it down.¹⁸19 Disabled persons who have received cash payments for 14 See CMS, “ Original Medicare (Part A and B) Eligibility and Enrollment ,” at https://www.cms.gov/Medicare/Eligibility-and-Enrollment/OrigMedicarePartABEligEnrol. 15 For additional information on Part A premiums, see Appendix E. 16 For additional information on enrolling in Medicare Parts A and B, see Medicare publication “Enrolling in Medicare Part A & Part B,” at https://www.medicare.gov/Pubs/pdf/11036-Enrolling-Medicare-Part-A-Part-B.pdf. 17 See “‘Welcome to Medicare’ package (automatically enrolled),” at https://www.medicare.gov/forms-help-resources/mail-you-get-about-medicare/welcome-to-medicare-package-automatically-enrolled. When first becoming eligible for Medicare, beneficiaries need to make a number of choices regarding the benefits they wish to sign up for and how they wish to receive them. For example, new enrollees need to decide whether they wish to remain in traditional Medicare (Parts A and B, the default option) or if they would like to receive their A and B benefits through a private Medicare Advantage Plan (Part C). Additionally, beneficiaries need to decide whether they would like to sign up for an outpatient prescription drug plan (Part D). T hese opt ions are described in the “ Welcome to Medicare” package. For free personalized health insurance counseling, beneficiaries may contact their local State Health Insurance Assistance Programs (SHIPs); contact information may be found at http://www.medicare.gov/contacts/ and https://acl.gov/programs/connecting-people-services/state-health-insurance-assistance-program-ship. 18 T hose who live in Puerto Rico are not automatically enrolled in Medicare Part B. T hey need to sign up for Part B during the initial enrollment period or possibly be subject to a penalty. See archived CRS Report R44275, Puerto Rico and Health Care Finance: Frequently Asked Questions, and Social Security Administration (SSA) Publication “Medicare in Puerto Rico,” at http://www.socialsecurity.gov/pubs/EN-05-10521.pdf. T he following bills, introduced in the 116th Congress, would have extended this automatic enrollment to residents of Puert o Rico: the Fairness in Medicare Part B Enrollment Act of 2019 (H.R. 2310), and the T erritories Health Equity Act of 2019 (H.R. 1354 and S. 1773). 19 Should a beneficiary decline Part B coverage, a new Medicare card will be issued that indicates that the beneficiary Congressional Research Service 3 link to page 9 link to page 12 link to page 12 Medicare Part B: Enrollment and Premiums Disabled persons who have received cash payments for 24 months under the Social Security or RRB disability programs also automaticallyautomatical y receive a Medicare card and are enrolled in Part B unless they specificallyspecifical y decline such coverage.¹⁹20 Those who choose to receive coverage through a Medicare Advantage plan (Part C) must enroll in Part B.

Part B. Those who are not receiving Social Security or RRB benefits, for example because they are still working²⁰stil working21 or have chosen to defer enrollment because they have not yet reached their full retirement benefit eligibility age,²¹22 must file an application with the SSA or RRB for Medicare benefits.²²23 There are two kinds of enrollment periods, one that occurs when individuals are initially eligible initial y eligible for Medicare and one annual general enrollment period for those who missed signing up during their initial enrollment period. A beneficiary may drop Part B enrollment and reenroll an unlimited number of times; however, premium penalties may be incurred.

Initial Enrollment Periods

Those who are not automaticallyautomatical y enrolled in Medicare may sign up during a certain period when they first become eligible. The initial enrollment period is seven months long and begins three months before the month in which the individual first turns 65. (SeeSee Table 1.) Beneficiaries who do not file an application for Medicare benefits during their initial enrollment period could be subject to the Part B late-enrollment penalty. (See "“Late-Enrollment Premium Penalty and Exemptions."Exemptions.”) If an individual accepts the automatic enrollment in Medicare Part B, or enrolls in Medicare Part B during the first three months of the initial enrollment period, coverage will wil start with the month in which an individual is first eligible, that is, the month of the individual's 65^th ’s 65th birthday. Those who enroll during the last four months will wil have their coverage start date delayed from one to three months after enrollment.²³24 The initial enrollment period of those eligible for Medicare based on disability for has Part A coverage only. (In the 117th Congress, H.R. 1826 would eliminate Part B late-enrollment penalties for Puerto Rico residents who enroll within five years of becoming entitled to Part A.) 20 Individuals with Amyotrophic Lateral Sclerosis are not subject to the 24 -month waiting period; for these individuals Medicare coverage begins the first day of the month during which disability benefits st art. Additionally, the Medicare coverage period for persons diagnosed with end-stage renal disease generally begins in the third month after the month when dialysis begins. 21 For additional information, see CMS, “Employer Community: Information about Medicare Enrollment,” at https://www.cms.gov/Outreach-and-Education/Find-Your-Provider-T ype/Employers-and-Unions/Employer-community.html. 22 In the past, individuals generally were eligible to receive both full Social Security retirement benefits and Medicare coverage starting at the age of 65. However, the age to receive full retirement benefits has changed for some people, depending on the year they were born. For example, those turning 65 in 2021 will not be eligible for full Social Security benefits until the age of 66 and 4 months. See https://www.ssa.gov/benefits/retirement/planner/agereduction.html. 23 T o apply, individuals can call or visit their local Social Security office or call Social Security at 1-800-772-1213. Some people also may apply online if they meet certain rules, at https://www.ssa.gov/benefits/medicare/. For Railroad Retirement Board (RRB) retirees, application information may be found at https://www.rrb.gov/Benefits/Medicare. See also SSA, “Apply Online For Medicare In Less T han 10 Minutes—Even If You Are Not Ready T o Retire,” at http://www.socialsecurity.gov/pubs/EN-05-10530.pdf, and SSA, “ How to Apply Online for Medicare Only,” at http://www.socialsecurity.gov/pubs/EN-05-10531.pdf. 24 An eligibility, enrollment date, and premium calculator may be found on the Medicare.gov website at https://www.medicare.gov/eligibilitypremiumcalc/. T he Consolidated Appropriations Act, 2021 (P.L. 116-260; Division CC, §102) eliminates these delays starting in 2023. For initial enrollment periods occurring in 2023 and subsequent years, coverage will begin the first day of the month after the month of enrollment for enrollments occurring during any of the seven months of the initial enrollment period. Congressional Research Service 4 link to page 9 link to page 9 Medicare Part B: Enrollment and Premiums Medicare based on disability or permanent kidney failure is linked to the date the disability or or permanent kidney failure is linked to the date the disability or treatment began.²⁴

. a. Starting in 2023, per changes made by the Consolidated Appropriations Act, 2021 ( P.L. 116-260; Division CC, §102), the coverage delays for enrol ment during the last three months of the initial enrol ment period wil be eliminated, and coverage wil be effective the first day of the month fol owing the month of enrol ment for enrol ments during any of the last four months of the initial enrol ment period. b. If one’s birthday fal s on the 1st of the month, then the enrol ment period starts a month earlier and coverage may begin on the 1st day of the month prior to one’s birthday month. General Enrollment Period General Enrollment Period

An individual who does not sign up for Medicare during the initial enrollment period must wait until the next general enrollment period. In addition, persons who decline Part B coverage when first eligible, or terminate Part B coverage, must also wait until the next general enrollment period 25 For additional information on Medicare eligibility for the disabled, see CRS Report RS22195, Social Security Disability Insurance (SSDI) and Medicare: The 24-Month Waiting Period for SSDI Beneficiaries Under Age 65 . Congressional Research Service 5 link to page 12 Medicare Part B: Enrollment and Premiums to enroll or reenroll. The general enrollment period lasts for three months from January 1 to March 31 of each year, with coverage beginning on July 1 of that year.26 A late-enrollment penalty may apply.²⁵27 (See "“Late-Enrollment Premium Penalty and Exemptions"” below.)

Special Enrollment Periods

Certain individuals may be eligible to enroll in Medicare Part B during specific timeframes outside of their initial enrollment period or the annual general enrollment period. For example, a working individual and/or the spouse of a working individual may be able to delay enrollment in Medicare Part B and enroll during a special enrollment period (SEP) without being subject to the late-enrollment penalty. Delayed enrollment is permitted when an individual aged 65 or older has group health insurance coverage based on the individual'’s (or spouse'’s) current employment (with an employer with 20 or more employees). (In 2019, about 2.1 million of the 4.0 million 2020, about 2.2 mil ion of the 3.8 mil ion working aged population were enrolled in Part A only, with most of the rest enrolled in both Parts A and B.)²⁶28 Delayed enrollment is also permitted for certain disabled persons who have group health insurance coverage based on their own or a family member'’s current employment with a large group health plan. For the disabled, a large group health plan is defined as one that covers 100 or more employees.

Specifically Specifical y, persons permitted to delay coverage without penalty are those persons whose Medicare benefits are determined under the Medicare Secondary Payer program.²⁷29 Under Medicare Secondary Payer rules, an employer (with 20 or more employees) is required to offer workers aged 65 and over (and workers'’ spouses aged 65 and over) the same group health insurance coverage that is made available to other employees.²⁸30 The worker has the option of accepting or rejecting the employer'’s coverage. If he or she accepts the coverage, the employer plan is primary (i.e., pays benefits first) for the worker and/or spouse aged 65 or over, and Medicare becomes the secondary payer (i.e., fillsfil s in the gaps in the employer plan, up to the limits of Medicare'’s coverage). Similarly, a group health plan offered by an employer with 100 or more employees is the primary payer for its employees under 65 years of age, or their dependents, who are entitled to Medicare because of disability.²⁹

31 26 Starting with the 2023 general enrollment period, coverage will begin the first day of the month after the month of enrollment, per the Consolidated Appropriations Act, 2021 (P.L. 116-260; Division CC, §102). 27 T he Part B general enrollment period is different from the Medicare Advantage and Part D annual enrollment period which runs from October 15 to December 7 each year, with coverage effective the following January. 28 2019 Medicare Working-Aged Beneficiary Counts from CMS 100% Unloaded Enrollment Database. Data provided by CMS, May 2021. 29 Social Security Act §1837(i) and 42 C.F.R. §407.20. See Medicare Publication “Medicare and Other Health Benefits: Your Guide to Who Pays First,” https://www.medicare.gov/Pubs/pdf/02179-Medicare-Coordination-Benefits-Payer.pdf, and CMS, “ Medicare Secondary Payer,” at https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Coordination-of-Benefits-and-Recovery-Overview/Medicare-Secondary-Payer/Medicare-Secondary-Payer.html. Also see CRS Report RL33587, Medicare Secondary Payer: Coordination of Benefits. 30 T he requirement that large employers’ coverage pays primary for Medicare-eligible employees was created by the T ax Equity and Fiscal Responsibility Act of 1982 (P.L. 97-248) and amended by the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA; P.L. 99-272). 31 For Medicare-eligible beneficiaries employed by organizations with fewer than 20 employees (or fewer than 100 employees for the disabled), Medicare generally pays primary and the employer group health plan generally pays secondary. However, those who are covered under group health plans from employers of any size, based on their own or their spouse’s current employment, will not be subject to the enrollment limitations or late-enrollment penalties for the period of time in which they have group health plan coverage. See SSA, Program Operations Manual System (POMS), HI 00805.751, “ SEP and Premium Surcharge Requirements for the Aged Effective 8/86 ,” at https://secure.ssa.gov/apps10/poms.nsf/lnx/0600805751. Organizations with fewer than 20 employees are not, Congressional Research Service 6 link to page 12 link to page 12 Medicare Part B: Enrollment and Premiums Such individuals may sign up for Medicare Part B (or Part A)32Such individuals may sign up for Medicare Part B (or Part A)³⁰ anytime that they (or their spouse) are stil are still working, and they are covered by a group health plan through the employer or union based on that work.³¹ Additionally33 Additional y, those who qualify for Medicare based on age may sign up during the eight-month period after retirement or the ending of group health plan coverage, whichever happens first. (If an individual'’s group health plan coverage, or the employment on which it is based, ends during the initial enrollment period, that individual would not qualify for a SEP.)³²34 Disabled individuals whose group plan is involuntarily terminated have six months to enroll without penalty.³³

35 For those enrolling during an employment-related SEP, coverage generallygeneral y begins the first of the month following the month of enrollment, and late-enrollment penalties would not apply.³⁴36 Those who qualify for a SEP based on coverage through current employment must provide proof of that coverage and employment when applying.³⁵

37 Certain international volunteers and individuals eligible for "“equitable relief"” may also qualify for a SEP and an exemption from the late-enrollment penalty. See "“Late-Enrollment Premium Penalty and Exemptions" ” below for additional detail on these circumstances.

Additional y, beginning in 2023, the Consolidated Appropriations Act, 2021 (P.L. 116-260; Division CC, Section 102) provides the Secretary of HHS the authority to establish special enrollment periods for beneficiaries who meet “exceptional conditions” that are to be defined by the Secretary. however, required to offer the same group health insurance to their Medicare-eligible employees that they offer to their other employees. In such cases, small employers may choose to instead offer coverage that wraps around the Medicare benefit or not provide any coverage, and their Medicare-eligible employees may need to enroll in Medicare Part s A and B when first eligible to avoid potential late-enrollment penalties and/or gaps in coverage. Individuals who are turning 65 and still working should check with their employers’ benefit administrator to learn how their employer health coverage works with Medicare. 32 T hose who have a Health Savings Account (HSA) with a high -deductible health plan through one’s own or one’s spouse’s current employment may need to stop contributing to the HSA at least six months prior to applying for Part A in order to avoid a tax penalty. See CRS In Focus IF11425, Health Savings Accounts (HSAs) and Medicare. 33 See Social Security publication “How to Apply for Medicare Part B during Your Special Enrollment Period,” at https://www.ssa.gov/pubs/EN-05-10012.pdf. 34 See “Special Enrollment Period” section of Social Security web page. SSA, “ Retirement Planner: Applying for Medicare Only,” at https://www.ssa.gov/benefits/medicare/. 35 T he Balanced Budget Act of 1997 (BBA; P.L. 105-33) added this exception to the penalty. This exception is for disabled persons (a) who, at the time they first become eligible for Part B, are enrolled in a group health plan (regardless of size) by virtue of their current or former employment and (b) whose continuous enrollment under the plan is involuntarily terminated at a time when their enrollment in the plan is by virtue of their or their spouse’ s former (i.e., not current) employment. These individuals have a special six-month enrollment period beginning on the first day of the month in which the termination occurs. 36 For those who apply while still employed or during the first month of the SEP, coverage may begin the month of enrollment. See SSA publication “Medicare” at https://www.ssa.gov/pubs/EN-05-10043.pdf. 37 T o sign up for Part B while employed or during the 8 months after employment ends, one must complete an “Application for Enrollment in Part B” (CMS-40B) and a “Request for Employment Information” (CMS-L564). Form CMS-40B and instructions for submission may be accessed at https://www.cms.gov/Medicare/CMS-Forms/CMS-Forms/CMS-Forms-Items/CMS017339, and form CMS-L564 and instructions for submission may be found at https://www.cms.gov/Medicare/CMS-Forms/CMS-Forms/CM S-Forms-Items/CMS009718. Under certain circumstances where individuals are unable to obtain evidence from the employer or health plan, alternative documentation may be accepted. For example, see January 28, 2021, question at SSA.gov, Social Security and Coronavirus Disease (COVID-19), “ Can I enroll in Medicare?” at https://www.ssa.gov/coronavirus/. Congressional Research Service 7 link to page 13 link to page 14 Medicare Part B: Enrollment and Premiums Late-Enrollment Premium Penalty and Exemptions Late-Enrollment Premium Penalty and Exemptions

Beneficiaries who do not sign up for Part B when first eligible, or who drop it and then sign up again later, may have to pay a late-enrollment penalty for as long as they are enrolled in Part B.³⁶ 38 Monthly premiums for Part B may go up 10% for each full 12-month period that one could have had Part B but did not sign up for it. (See "“Calculation of Penalty.".”) Some may be exempt from paying a late-enrollment penalty if they meet certain conditions that allowal ow them to sign up for Part B during a SEP. (See "“Penalty Exemptions.".”) In 20192020, about 1.4% of Part B enrollees (about 764,000776,200) paid this penalty.³⁷39 On average, their total premiums (standard premium plus penalty) were about 2827% higher than what they would have been had they not been subject to the penalty.

Those who receive premium assistance through a Medicare Savings Program do not pay the late-enrollment penalty.³⁸ Additionally, 40 Additional y, for those disabled persons under the age of 65 subject to a premium penalty, once the individual reaches the age of 65, he or she qualifies for a new enrollment period and no longer pays a penalty.

The penalty provision was included in the original Medicare legislation enacted in 1965 to help prevent adverse selection by creating a strong incentive for all eligible al eligible beneficiaries to enroll in Part B.³⁹41 Adverse selection occurs when only those persons who think they need the benefits actuallyactual y enroll in the program. When this happens, per capita costs are driven up and premiums go up, causing more enrollees (presumably the healthier and less costly ones) to drop out of the program.⁴⁰42 With most eligible persons over the age of 65 enrolled in Part B, the costs are spread over the majority of this population and per capita costs are less than would be the case if adverse selection had occurred.

As the Part B late-enrollment penalty is tied to Medicare eligibility and not to access to covered services, individuals who live in areas where Medicare benefits are generallygeneral y not provided, such as outside of the United States or in prison, could still stil be subject to the Part B late-enrollment penalty if they do not sign up for (or if they drop) Part B when eligible.⁴¹ To illustrate43 To il ustrate, if a retired Medicare-eligible individual stopped paying Part B premiums while living 38 For more information, see Medicare.gov “Part B Late Enrollment Penalty,” at https://www.medicare.gov/your-medicare-costs/part-b-costs/part-b-late-enrollment-penalty. 39 Figures provided by CMS, May 2021. 40 T he state pays the standard premium regardless of the date the beneficiary first became eligible for Medicare Part B. See SSA, Program Operations Manual System (POMS), Section HI 00815.001, “ State Buy-In Program General Description,” at https://secure.ssa.gov/apps10/poms.nsf/lnx/0600815001; and Ibid., Section HI 00815.039, “Effect of Buy-In on the Individual,” at https://secure.ssa.gov/apps10/poms.nsf/lnx/0600815039. 41 Social Security Act §1839(b). 42 Specifically, adverse selection occurs when beneficiaries, who generally have more information than insurers about their own health status and expected health care needs, make insurance purchasing decisions based on their expect ed use of the insurance benefit. T heir decision to purchase insurance is based on a comparison of the value of the insurance coverage, given their expected use, and the cost of the insurance. Should only (or disproportionately) persons who are high health care users enroll in the program, per capita costs would increase, thereby making the health insurance purchase decision less attractive for healthier, and presumably less costly, beneficiaries who then , in turn, might drop out of the program. Subsequent iterations of this cycle would drive premium costs higher and higher for a smaller and smaller subset of ever sicker and costlier beneficiaries. 43 By comparison, to be eligible for the outpatient prescription drug benefit under Part D, a Medicare beneficiary must reside in a geographic area where a Part D plan is available. Individuals who are incarcerated or who live outside the United States are therefore not eligible to enroll in (or continue enrollment in) Part D. Because the Part D penalty is based on periods when one is eligible but not enrolled, periods of incarceration or extended residence outside of the United States would not be included in that calculation. For example, an individual living outside of the country during his or her initial enrollment period would be given a special enrollment period (SEP) upon returning to the United States and would be able to sign up for Part D at that time without penalty. See SSA, Program Operations Manual Congressional Research Service 8 Medicare Part B: Enrollment and Premiums Medicare-eligible individual stopped paying Part B premiums while living overseas for a three-year period and reenrolled when returning to the United States, he or she would not be entitled to a SEP. This individual would instead need to enroll during the general enrollment period and could also be subject to late-enrollment penalties based on that three-year lapse in coverage.

Additionally, Additional y, Part B does not have a "creditable"“creditable” coverage exemption similar to that under the Part D outpatient prescription drug benefit.⁴²44 Except for certain circumstances discussed below, having equivalent coverage does not entitle one to a SEP should one decide to enroll in Part B later. For example, an individual who has retiree coverage similar to Part B and therefore decides not to enroll in Part B when first eligible could be subject to late-enrollment penalties if he or she enrolls in Part B at a later time (for example, because the retiree coverage was discontinued).

Calculation of Penalty

The late-enrollment penalty is equal to a 10% premium surcharge for each full 12 months of delay in enrollment and/or reenrollment during which the beneficiary was eligible for Medicare.⁴³ 45 The period of the delay is equal to (1) the number of months that elapse between the end of the initial initial enrollment period and the end of the enrollment period in which the individual actually actual y enrolls or (2) for a person who reenrolls, the months that elapse between the termination of coverage and the close of the enrollment period in which the individual enrolls. General yenrolls.

Generally, individuals who do not enroll in Part B within a year of the end of their initial enrollment period would be subject to the premium penalty. For example, if an individual'’s initial enrollment period ended in September 20172018 and the individual subsequently enrolled during the 20182019 general enrollmentenrol ment period (January 1 through March 31), the delay would be less than 12 months and the individual would not be subject to a penalty. However, if that individual delayed enrolling until the 20202021 general enrollment period, the premium penalty would be 20% of that year' year’s standard premium. (Although the elapsed time covers a total of 30 months of delayed enrollment, the episode includes only two full 12-month periods.) An individual who waits 10 years to enroll in Part B could pay twice the standard premium amount.

The late-enrollment surcharge is calculated as a percentage of the monthly standard premium amount (e.g., $144.60 in 2020),⁴⁴148.50 in 2021),46 and that amount is added to the beneficiary'’s premium each month. The hold-harmless provision does not provide protection from increases in the penalty amounts. This means that although those who are held harmless in 2020 pay reduced amounts.47 System (POMS), Section HI 03001.001, “ Description of the Medicare Part D Prescription Drug Program,” at https://secure.ssa.gov/poms.nsf/lnx/0603001001, and CMS Publication, “ Understanding Medicare Part C & D Enrollment Periods,” at https://www.medicare.gov/Pubs/pdf/11219-Understanding-Medicare-Part-C-D.pdf. 44 Under Part D, individuals who have maintained drug coverage equivalent to Medicare’s standard prescription drug coverage prior t o enrolling in Part D are not subject to a late-enrollment penalty. Examples of “ creditable” Part D drug coverage include drug coverage from a former employer or union, T RICARE, the Department of Veteran s Affairs (VA), the Federal Employees Health Benefits Program (FEHBP), or the Indian Health Service. As an illustration, if an individual did not sign up for Part D when first becoming eligible because he or she already had equivalent coverage through a former employer, the individual could sign up for Part D at any time wit hout penalty during the time he or she maintained creditable coverage. Should that coverage end, the individual would be entitled to a special enrollment period and could enroll in Part D without penalty . Beneficiaries who have a break in creditable prescription drug coverage usually have 63 consecutive days to enroll in Part D during a SEP. 45 Social Security Act §1839(b). 46 SSA, Program Operations Manual System (POMS), Section HI 01001.010, “Premium Increase for Late Enrollment,” at https://secure.ssa.gov/poms.nsf/lnx/0601001010. 47 Although those who are held harmless pay reduced premiums, any late-enrollment penalties are calculated as a percentage of the 2020 premium of $144.60 per month.

premium for that year (e.g., in 2021, a percentage of $148.50). Congressional Research Service 9 link to page 21 Medicare Part B: Enrollment and Premiums Using the example above in which an individual is subject to a 20% premium penalty, the total monthly premium in 20202021 would be calculated as follows (see text box):

= $148.50 + $29.70 = $178.20 *Premium amounts are rounded to the nearest 10 cents. For those subject to the high-income premium (see "“Income-Related Premiums"”), the late-enrollment surcharge applies only to the standard monthly premium amount and not to the higher-income adjustment portion of their premiums. Using the example of a 20% penalty for a beneficiary with an income of between $8788,000 and $109111,000, the applicable income-related adjustment of $57.8059.40 would be added on to the penalty-adjusted premium of $173.50 ($144.60 + $28.90178.20 ($148.50 + $29.70 penalty), for a total monthly premium of $231.30.⁴⁵

237.60.48 There is no upper limit on the amount of the surcharge that may apply, and the penalty continues to apply for the entire time the individual is enrolled in Part B. Each year, the surcharge is calculated using the standard premium amount for that particular year. Therefore, if premiums increase in a given year, the dollar value of the surcharge will wil increase as well.

wel . Penalty Exemptions

Under certain conditions, select beneficiaries may be exempt from the late-enrollment penalty. Beneficiaries who are exempt include working individuals (and their spouses) with group coverage, some international volunteers, and those who based their nonenrollment decision on incorrect information provided by a federal representative. Individuals who are permitted to delay enrollment have their own SEPs.

Current Workers

As described above (see "“Special Enrollment Periods"”), some individuals (or their spouse) who are stil are still working and receiving employer-provided health insurance through that employment may qualify for a SEP and not be subject to late-enrollment penalties. Those who fail to enroll during this special enrollment period are considered to have delayed enrollment and thus could be subject to the penalty.⁴⁶49 For example, even though an individual may have continued health 48 T hose who pay the high-income premiums are not protected by the hold-harmless provision. For additional information, see SSA, Program s Operation Manual, Section HI 01101.031, “How IRMAA is Calculated and How IRMAA Affects the T otal Medicare Premium,” at https://secure.ssa.gov/apps10/poms.nsf/lnx/0601101031. 49 T hose who are covered under group health plans from employers of any size, based on their own or their spouse’s current employment, will not be subject to the enrollment limitations or late-enrollment penalties for the period of time Congressional Research Service 10 Medicare Part B: Enrollment and Premiums may have continued health coverage through the former employer after retirement or have COBRA coverage,⁴⁷50 he or she must sign up for Part B within eight months of retiring to avoid paying a Part B penalty if he or she eventual yshe eventually enrolls. Individuals who return to work and receive health care coverage through that employment may be able to drop Part B coverage, qualify for a new special enrollment period upon leaving that employment, and reenroll in Part B without penalty as long as enrollment is completed within the specified time frame.

International Volunteers

Some international volunteers may also be exempt from the Part B late-enrollment penalty. The Deficit Reduction Act of 2005 (P.L. 109-171) permits certain individuals to delay enrollment in Part B without a late-enrollment penalty if they volunteered outside of the United States for at least 12 months through a program sponsored by a tax-exempt organization defined under Section 501(c)(3) of the Internal Revenue Code.⁴⁸51 These individuals must demonstrate that they had health insurance coverage while serving in the international program.⁴⁹52 Individuals permitted to delay enrollment have a six-month SEP, which begins on the first day of the first month they no longer qualify under this provision.

Equitable Relief

Under certain circumstances, a SEP may be created and/or late-enrollment penalties may be waived if a Medicare beneficiary can establish that an error, misrepresentation, or inaction of a federal worker or an agent of the federal government (such as an employee of the Social Security Administration, CMS, or a Medicare administrative contractor) resulted in late Part B enrollment.⁵⁰53 To qualify for an exception under these conditions, the beneficiary must provide documentary evidence of the error, which "“can be in the form of statements from employees, agents, or persons in authority that the allegedal eged misinformation, misadvice, misrepresentation, inaction, or erroneous action actually occurred."⁵¹

actual y occurred.”54 Time-limited equitable relief also may be granted for certain categories of individuals. For example, CMS may provide a special enrollment period to those affected by a weather-related emergency or a major disaster.⁵²55 As described below, during the Coronavirus Disease 2019 (COVID-19)COVID-19 public health emergency, certain individuals who were not able to enroll in Part B in a timely manner are being allowedwere al owed additional time to enroll under equitable relief (through June 17, 2020. Additionally, 2020). Additional y, CMS determined that it did not provide adequate information regarding Part in which they have group health plan coverage. See SSA, Program Operations Manual System (POMS), HI 00805.751, “SEP and Premium Surcharge Requirements for the Aged Effective 8/86,” at https://secure.ssa.gov/apps10/poms.nsf/lnx/0600805751. 50 For a description of COBRA, see CRS Report R40142, Health Insurance Continuation Coverage Under COBRA. 51 Social Security Act §1837(k) and 42 C.F.R. §407.21. 52 See SSA, Program Operations Manual System (POMS), Section HI 00805.355, “Evidentiary Requirements for the SEP or Premium-Surcharge Rollback for International Volunteers,” at https://secure.ssa.gov/apps10/poms.nsf/lnx/0600805355. 53 Social Security Act §1837(h) and 42 C.F.R. §407.32. 54 For additional information, see SSA, Program Operations Manual System (POMS), Section HI 00805.170, “Conditions for Providing Equitable Relief,” at https://secure.ssa.gov/poms.nsf/lnx/0600805170, and Ibid, Section HI 00805.175, “Evidence of Government Error or Delay ,” at https://secure.ssa.gov/poms.nsf/lnx/0600805175. 55 See SSA, Program Operations Manual System (POMS), Section HI 00805.324, “Equitable Relief for Enrollment Request Affected by Major Disasters,” at https://secure.ssa.gov/apps10/poms.nsf/lnx/0600805324. Congressional Research Service 11 Medicare Part B: Enrollment and Premiums CMS determined that it did not provide adequate information regarding Part B enrollment to certain individuals with exchange coverage who enrolled in Medicare Part A and is allowing al owed equitable relief to these individuals (through June 2020.

). Limited Time Medicare Enrollment Equitable Relief Equitable Relief During the COVID-19 Pandemic-Related National Emergency

National Emergency Beneficiaries who were not able to enroll in Part B in a timely manner as a result of local Social Security field office closures during the COVID-19 public health emergency may bewere granted certain enrollment flexibilities under equitable relief.⁵³ Specifically, CMS is granting56 Specifical y, CMS granted equitable relief in the form of additional time to enroll during one'’s initial enrollment period, during the annual general enrollment period, or during a special enrollment period (SEP), such as the 8-month period when a beneficiary'’s employer coverage based on current employment ends. Beneficiaries arewere eligible for this equitable relief only if they had an initial enrollment period, general enrollment period, or SEP during the period from March 17, 2020 through June 17, 2020, and the beneficiary did not apply for Part B during that enrollment period. Eligible beneficiaries who wishwanted to use this equitable relief to enroll in Part B mustneeded to file their enrollment request by June 17, 2020.⁵⁴ Coverage will be Coverage was effective the month that would have been applicable had the application been filed at the time of the individual'’s original (but missed) initial, general, or special enrollment period.

Limited Time Equitable Relief Relief for Individuals with Medicare Part A and Exchange Coverage

CMS generally CMS general y encourages those who have coverage through an individual exchange (also known as marketplace) plan, and subsequently become eligible for Medicare, to drop the exchange coverage and enroll in Medicare during their initial enrollment period. After an individual has become eligible for Medicare Part A, any tax credits and cost-sharing reductions that that individual individual receives through an exchange plan ends.⁵⁵57 CMS recognized that "“these individuals did not receive the information necessary at the time of their Medicare [initial enrollment period], Part B SEP for the working aged or disabled, or initial enrollment in the Exchange to make an informed decision regarding their Part B enrollment."⁵⁶”58 This may have resulted in these individuals individuals not enrolling in Part B, or enrolling in Part B late and being subject to a late enrollment penalty.

CMS is thus offering CMS thus offered time-limited equitable relief through June 30, 2020, for certain individuals enrolled in both premium-free Medicare Part A and in a plan provided through the health insurance exchanges.⁵⁷ Specifically, those who are currently, or had previously been,59 Specifical y, those who had been enrolled in an exchange plan and in premium-free Medicare Part A, and had a Part A entitlement date that began on or after July 1, 2013 (or a Part B SEP that ended on or after October 1, 2013) may enroll in Part B without penalty through June 30, 2020. Additionally, the Part B late enrollment penalties of those who had both Part A and exchange coverage and signed up for Part B outside of their initial enrollment period may be reduced or eliminated. To request this equitable relief, qualifying individuals must contact the Social Security Administration and provide appropriate documentation indicating that they were enrolled in an exchange plan and eligible for Medicare during the specified period.⁵⁸

could enroll in Part B without 56 See CMS, “Enrollment Issues for COVID-19 Pandemic-Related National Emergency, Questions and Answers for Medicare Beneficiaries,” at https://www.cms.gov/files/document/enrollment-issues-covid-ab-faqs.pdf. 57 CMS indicates that in this instance, the individual should contact the marketplace at least 15 days before the date one wants the coverage to end. 58 CMS Factsheet, “Assistance for Individuals with Medicare Part A and Exchange Coverage Infor mation for SHIPs and Exchange Assisters,” October 2019, https://www.cms.gov/Medicare/Eligibility-and-Enrollment/Medicare-and-the-Marketplace/Downloads/SHIP-Navigator-Fact-Sheet -2019.pdf. 59 Individuals who paid a premium for Medicare Part A were not eligible for this equitable relief, as they are required to enroll in Part B in order to enroll in Part A. T hose enrolled in a Marketplace Small Business Health Options Program (SHOP) plan were also not eligible for this equitable relief, as such plans are considered employer sponsored plans and, as described earlier, these individuals already qualify for a special enrollment period once that coverage ends. Congressional Research Service 12 link to page 27 link to page 27 Medicare Part B: Enrollment and Premiums penalty through June 30, 2020. Additional y, the Part B late enrollment penalties of those who had both Part A and exchange coverage and signed up for Part B outside of their initial enrollment period could have been reduced or eliminated. Collection of the Part B Premium Collection of the Part B Premium

Part B premiums may be paid in a variety of ways.⁵⁹60 If an enrollee is receiving Social Security or Railroad Retirement benefits,⁶⁰61 the Part B premiums must, by law, be deducted from these benefits. Additionally, Additional y, Part B premiums are deducted from the benefits of those receiving a Federal Civil Service Retirement annuity.⁶¹62 The purpose of collecting premiums by deducting them from benefits is to keep premium collection costs at minimum. This withholding does not apply to those beneficiaries receiving state public assistance through a Medicare Savings Program because their premiums are paid by their state Medicaid program. (See "“Premium Assistance for Low-Income Beneficiaries.")

.”) Part B enrollees who do not receive monthly Social Security, Railroad Retirement, or Civil Service Retirement benefits, or assistance through a Medicare Savings Program, pay premiums directly to CMS.⁶²

63 Deduction of Part B Premiums from Social Security Checks

By law, a Social Security beneficiary who is enrolled in Medicare Part B must have the Part B premium automaticallyautomatical y deducted from his or her Social Security benefits.⁶³64 Automatic deduction from the Social Security benefit check also applies to Medicare Advantage participants who are enrolled in private health care plans in lieu of traditional Medicare.⁶⁴65 In instances in which a beneficiary'beneficiary’s monthly Social Security benefit is not sufficient to cover the entire Part B premium amount, Medicare may bill bil the beneficiary for the balance.⁶⁵ In 201966 In 2020, about 68% of Medicare Part B enrollees (41.7 millionmil ion) had their Part B premiums deducted from their Social Security benefit checks.⁶⁶

checks.67 Social Security beneficiaries who do not pay Medicare Part B premiums include those who are under the age of 65 and do not yet qualify for Medicare (e.g., began receiving Social Security 60 SSA, Program Operations Manual System (POMS), Section HI 01001.020, “ Collection of Premiums,” at https://secure.ssa.gov/poms.nsf/lnx/0601001020. 61 Social Security Act §1840(a)(1) and §1840(b)(1). See CRS Report R42035, Social Security Primer, and CRS Report RS22350, Railroad Retirem ent Board: Retirem ent, Survivor, Disability, Unem ploym ent, and Sickness Benefits. 62 See CRS Report 98-810, Federal Employees’ Retirement System: Benefits and Financing . 63 42 C.F.R. §408.60. 64 Social Security Act §1840(a)(1). 65 Beneficiaries who receive their Parts A and B benefits through Medicare Advantage (MA, Part C), must still pay the monthly Part B premium, but may pay different amounts. For example, some MA plans may offer an additional benefit by reducing t he amount one pays for the Part B premium. Alternatively, some MA plans may be more expensive than traditional Medicare, for example because they provide benefits beyond what is provided under traditional Medicare, and may charge a premium in addition to t he Part B premium. T he Social Security Administration has in place a “safety net” to prevent the deduction of more than $300 of Part C and Part D plan premiums from a single Social Security check. For amounts over $300, the enrollee may be billed directly. 66 SSA, Program Operations Manual System (POMS), Section HI 01001.041, “Collection from Beneficiaries When the Amount of the Benefit Payment is Less than the Amount of the Premium ,” at https://secure.ssa.gov/apps10/poms.nsf/lnx/0601001041. 67 Figures provided by CMS, May 2021. Congressional Research Service 13 link to page 29 link to page 29 Medicare Part B: Enrollment and Premiums under the age of 65 and do not yet qualify for Medicare (e.g., began receiving Social Security benefits at the age of 62); receive low-income assistance from Medicaid to pay the Part B premium; have started to receive Social Security disability insurance (SSDI) but are not eligible for Medicare Part B because they have not received SSDI for 24 months; or chose not to enroll in Medicare Part B.

The amount of an individual'’s Social Security benefits cannot go down from one year to the next as a result of the annual Part B premium increase, except in the case of higher-income individuals subject to income-related premiums. (See "“Protection of Social Security Benefits from Increases in Medicare Part B Premiums.".”) For those beneficiaries "“held harmless,"” the dollar amount of their Part B premium increases would be held below or equal to the amount of the increase in their monthly Social Security benefits.

Part B Enrollees Who Do Not Receive Social Security Benefits

A small A smal percentage of Medicare Part B enrollees do not receive Social Security benefits. For example, some individuals aged 65 and older may have deferred signing up for Social Security for various reasons, for instance if they have not yet reached their full Social Security retirement age⁶⁷age68 or are still stil working. Additionally, Additional y, certain persons who spent their careers in employment that was not covered by Social Security—including certain federal, state, or local government workers and certain other categories of workers—do not receive Social Security benefits but may still stil qualify for Medicare. For those who receive benefit payments from the RRB⁶⁸RRB69 or the Civil Service Retirement System (CSRS),⁶⁹70 Part B premiums are deducted from the enrollees'’ monthly benefit payments. While RRB retirement benefit amounts are protected by the hold-harmless provision, CSRS benefits are not held harmless from annual increases in the Part B premium.

For those who do not receive these types of benefit payments, Medicare will generally bill wil general y bil directly for their premiums every three months.⁷⁰71 The enrollee who is being billed bil ed does not necessarily have to pay his or her own premiums; premiums may be paid by the enrollee, a relative, friend, organization, or anyone else.⁷¹ 72 In cases where an organization wants to be billed bil ed for the Part B premiums of a number of Medicare beneficiaries, it may enter into a formal group-billing bil ing arrangement with CMS.⁷²73 Those approved as group billersbil ers include such entities as city and county governments, state teacher retirement systems, and certain religious orders.

68 See CRS Report R44670, The Social Security Retirement Age. 69 Social Security Act §1840(b)(1). 70 Generally, employees of the federal government hired before 1984 are covered by the Civil Service Retirement System (CSRS) and are not covered by Social Security. Most federal workers first hired into federal service on or after January 1984 participate in the Federal Employees’ Retirement System (FERS), which includes Social Security coverage. However, the T ax Equity and Fiscal Responsibility Act (P.L. 97-248) enabled federal workers to be eligible for Medicare based on their federal employment . See CRS Report R42741, Laws Affecting the Federal Em ployees Health Benefits (FEHB) Program . 71 Payment may be made by check, money order, or credit card; alternatively, one may schedule a payment to be automatically deducted from one’s bank account. Premium billing form and information may be found at https://www.medicare.gov/forms-help-resources/mail-you-get-about -medicare/medicare-premium-bill-cms-500. 72 SSA, Program Operations Manual System (POMS), Section HI 01001.225, “When Premium Notices May Be Sent to an Individual Other T han an Enrollee,” at https://secure.ssa.gov/apps10/poms.nsf/lnx/0601001225. 73 SSA, Program Operations Manual System (POMS), Section HI 01001.230, “Group Collection-General,” at https://secure.ssa.gov/poms.nsf/lnx/0601001230. Congressional Research Service 14 link to page 21 link to page 12 link to page 12 link to page 21 link to page 29 link to page 29 link to page 40 Medicare Part B: Enrollment and Premiums Nonpayment of premiums results in termination of enrollment in the Part B program, although a grace period (through the last day of the third month following the month of the due date) is allowed al owed for beneficiaries who are billedbil ed and pay directly.⁷³

74 Determining the Part B Premium

Each year, the CMS actuaries estimate total per capita Part B costs for beneficiaries aged 65 and older over for the following year and set the Part B premium to cover 25% of expected Part B expenditures.⁷⁴ expenditures.75 However, because prospective estimates may differ from the actual spending for the year, contingency margin adjustments are made to ensure sufficient income to accommodate potential variation in actual expenditures during the year. (See "“Contingency Margin.".”) The Part B premium is a single national amount that does not vary with a beneficiary'’s age, health status, or place of residence. Premiums may be adjusted upward for late enrollment (see "Late-“Late- Enrollment Premium Penalty and Exemptions”") and for beneficiaries with high incomes (see "“Income-Related Premiums”"), or they may be adjusted downward for those protected by the hold-harmless provision (see "“Protection of Social Security Benefits from Increases in Medicare Part B Premiums").

Premiums”). Monthly Part B premiums are based on the estimated amount that would be needed to finance Part B expenditures on an incurred basis during the year. In estimating needed income and to account for potential variation, CMS takes into consideration the difference in prior years of estimated and actual program costs, the likelihood and potential impact of potential legislation affecting Part B in the coming year, and the expected relationship between incurred and cash expenditures (e.g., payments for some services provided during a particular year may not be paid until the following year). Once the premium has been set for a year, it will wil not be changed during that year.

While both aged and disabled Medicare beneficiaries may enroll in Part B, the statute provides that Part B premiums are to be based only on the expected program costs—that is, the monthly actuarial rate—for the aged (those 65 years of age and older).⁷⁵76 The actuarial rate for the aged is defined as one-half of the expected average monthly per capita program costs for the aged plus any contingency margin adjustments. Standard Part B premiums are one-half of that actuarial rate. (See See Appendix A for a discussion of the for a history of the premium methodology.) Part B costs not covered by premiums are paid for through transfers from the General Fund of the Treasury. The monthly actuarial rates for bothboth aged and disabled enrollees are used to determine the needed amount of matching general revenue funding.⁷⁶

77 Starting in 2016, a $3.00 per month surcharge is beinghas been added onto the standard premium (higher amounts for high-income individuals). To mitigate the expected large premium increases for those 74 T his grace period may be extended for up to an additional three months if the enrollee can establish that nonpayment was due to circumstances beyond his or her control, such as being physically or mentally incapable of making premium payments or due to an administrative error. T here is no financial hardship exemption, although those with sufficiently low income may qualify for premium assistance from a state Medicaid program. 75 Part B premium announcements are generally made in the fall prior to the effective year. 76 Social Security Act §1839(a). 77 T he actuarial rate for the disabled is defined as one-half of the expected average monthly cost per disabled enrollee. Average per capita costs for the disabled are generally higher than those for the aged; therefore, were these average costs included in the premium determination, all Part B enrollees could pay higher premiums. As general revenue funding is determined using both the average costs of the aged and the disabled, this funding is sufficient to compensate for the reduction in premium revenues due to not including the costs of the disabled in determining the premium amount. Congressional Research Service 15 link to page 49 link to page 49 link to page 23 link to page 21 Medicare Part B: Enrollment and Premiums amounts for high-income individuals). To mitigate the expected large premium increases for those not held harmless in 2016, the Bipartisan Budget Act of 2015 (BBA 15; P.L. 114-74) required that 2016 Medicare Part B premiums be set as if the hold-harmless rule were not in effect—in other words, to calculate premiums as if all al enrollees were paying the same annual inflation-adjusted standard premium. (For additional information on the changes made by BBA 15, seesee Appendix D.) Additional y, as described below, the Continuing Appropriations Act, 2021 and Other Extensions Act (P.L. 116-159) extended the imposition of this surcharge. ) To compensate for the lost premium revenue (below the required 25%) and to ensure that the SMI Trust Fund had adequate income to cover payments for Part B benefits in 2016, the act allowed BBA 15 al owed for additional transfers from the General Fund of the Treasury to the SMI Trust Fund. To offset the approximately $9 billion bil ion in increased federal spending in 2016 resulting from the reduction in standard premiums for those not held harmless, a $3.00 surcharge was added to the monthly premium in 2016, and will wil continue to be applied in subsequent years until the additional federal costs are fully offset.⁷⁷78 For those who pay high-income premiums, thethis surcharge increases on a sliding scale up to $9.60. (See "“Income Categories and Premium Adjustments."”) It iswas estimated that the surcharge willwould be applied to premiums through 2021.⁷⁸

Premium Calculation for 2020

To determine the 202079 Similarly, the Continuing Appropriations Act, 2021 and Other Extensions Act limited the growth in the Part B premium for 2021 (see “Premium Calculation for 2021” for details on the premium calculation methodology). To ensure that the SMI trust fund is adequately financed in 2021, additional general revenue transfers are being made to replace the lost premium income.80 The $3.00 surcharge, and applicable high-income surcharges, wil continue to be applied until those amounts are repaid. It is estimated that this surcharge wil be applied to premiums through FY2026.81 Premium Calculation for 2021 To determine the 2021 monthly Part B premium amount,82 monthly Part B premium amount,⁷⁹ CMS first estimated the monthly actuarial rate for enrollees aged 65 and older using actual per-enrollee costs by type of service from program data through 20182020 and projected these costs through 2020for subsequent years. CMS estimated that the monthly amount needed to cover one-half of the total benefit and administration costs for the aged in 20202021 would be $281.31. However, because307.52. Because of expected variations between projected and actual costs, a contingency adjustment of $4.088.17 was added to this amount. (See " “Contingency Margin," below.) After a reduction of $2.19” 78 T he $9 billion consists of about $7.4 billion in increased federal spending due to the reduced standard premiums and about $1.6 billion in lost revenues due to the reduction in high -income adjustments. T he $3.00 standard premium surcharge “pays for” the increased general revenue transfers in 2016, while the additional high -income surcharge adjustments are used to offset the reduction in the income-related adjustment amounts. CMS, “ Medicare Program: Medicare Part B Monthly Actuarial Rates, Premium Rate, and Annual Deductible Beginning January 1, 2016,” 80 Federal Register 70811, November 16, 2015. 79 2020 Medicare T rustees Report, p. 84. In the final year of the repayment adjustments, the surcharge may be set at less than $3.00 to avoid overpayment. 80 CMS estimates that the increase in the balance due in 2021 will be about $8.8 billion, which consists of $946 million in forgone income-related premium income plus the additional transfer amount of about $7.9 billion. CMS, “ Medicare Program: Medicare Part B Monthly Actuarial Rates, Premium Rate, and Annual Deductible Beginning January 1, 2021,” 85 Federal Register 71904, November 12, 2020. 81 CBO, “ Estimate for H.R. 8337, the Continuing Appropriations Act, 2021 and Other E xtensions Act, as Passed by the House of Representatives on September 22, 2020 ,” September 23, 2020, T able 2, at https://www.cbo.gov/publication/56629. 82 CMS, “Medicare Program: Medicare Part B Monthly Act uarial Rates, Premium Rate, and Annual Deductible Beginning January 1, 2021,” 85 Federal Register 71904, November 12, 2020. Congressional Research Service 16 Medicare Part B: Enrollment and Premiums below.) After a reduction of $1.39 to account for expected interest on trust fund assets, the preliminary to account for expected interest on trust fund assets, the monthly actuarial rate for the aged for 2021 was determined to be $314.30. However, due to adjustments mandated by the Continuing Appropriations Act, 2021 and Other Extensions Act (P.L. 116-159), the monthly actuarial rate for 2021 was reduced to $291.00.83 The Part B standard premium would normal y be calculated as one-half of the actuarial rate (i.e., half of $291.00, or $145.50 per month);84 however, the BBA 15/P.L. 116-159 repayment surcharge of $3.00 was then added onto that amount for a total monthly premium of $148.50. was determined to be $283.20. The 2020 Part B standard premium is one-half of $283.20, or $141.60 per month⁸⁰ (25% of the monthly expected per capita costs of the aged). The BBA 15 repayment surcharge of $3.00 was then added onto that amount for a total monthly premium of $144.60. (As noted, only those not held harmless pay the standard 2020 premium and surcharge. Those held harmless in 2020 may pay lower amounts.)

Contingency Margin

Contingency Margin The contingency margin is the amount set aside to cover an appropriate degree of potential variation between actual and projected costs in a given year. For example, in some years, legislation legislation that resulted in increased Medicare Part B expenditures for the year was enacted after the premium for the year had been set. The Medicare actuaries consider a contingency reserve ratio—net assets at the end of a year in the Part B account of the SMI Trust Fund compared to the following year'’s expected expenditures—in the amount of 15% to 20% to be adequate, and normallynormal y aim for a 17% ratio when determining Part B financing for the upcoming year. Financing fell short of this goal in 2019; however, the CMS actuaries estimate that the 2020 premium rates will allow asset levels in the Part B account to increase to appropriate levels by the end of 2020.

The contingency margin in 2020 is affected by a number of factors. For example, The contingency margin for 2021 reflects financing rates set above the normal target due to the higher-than-usual uncertainty in spending estimates. The contingency margin in 2021 is affected by a number of factors. For example, the contingency margin was adjusted upward to account for the uncertainty and potential impact of the COVID-19 pandemic.85 Additional y, starting in 2011, manufacturers and importers of brand-name drugs began paying a fee that is allocatedal ocated to the SMI Trust Fund. The contingency margin was thus reduced to account for this additional revenue. Further, certain payment incentives to encourage the development and use of health information technology (HIT) by Medicare physicians are excluded from premium determinations. (HIT bonuses or penalties are directly offset through transfers of general funds from the Treasury.) The 20202021 contingency margin adjustment of $4.08 8.17 reflects the expected net effects of all al of the above factors.

Income-Related Premiums

For the first 41 years of the Medicare program, all al Part B enrollees paid the same Part B premium, regardless of their income. However, the Medicare Modernization Act of 2003 (MMA; P.L. 108-173)⁸¹ 83 Section 2401 of the Continuing Appropriations Act, 2021 and Other Extensions Act ( P.L. 116-159) specifies that the 2021 monthly actuarial rate for enrollees aged 65 and older be determined as the sum of the 2020 monthly actuarial rate for enrollees aged 65 and older and one-fourth of the difference between the 2020 monthly actuarial rate and the preliminary 2021 monthly actuarial rate (as determined by the Secretary of HHS) for such enrollees. T he monthly actuarial rate for 2021 was thus calculated as follows: $283.20 (the actual actuarial rate for 202 0) + (0.25 x ($314.30 (the unadjusted monthly actuarial rate for 2021) - $283.20)) = $291.00 (rounded to the nearest dime). 84 Rounded to the nearest dime. 85 Although about $43 billion was paid out of the Part B account of the SMI trust fund in 2020 as part of the Accelerated and Advanced Payment (AAP) programs, and full repayments are not expected until 2021, the Continuing Appropriations Act, 2021 and Other Extensions Act required that a transfer be made from the T reasury to the SMI trust fund to restore t he AAP payments paid out and specifies that any future AAP provider repayments be transferred to the T reasury. Because the CMS 2021 Part B financing projections assume that roughly $43 billion would be transferred from the T reasury to Part B before the end of CY2020, the AAP payments did not affect the 2021 Part B premium contingency margin. For additional information on the AAP program, see CRS Report R46698, Medicare Accelerated and Advance Paym ents and COVID-19: Frequently Asked Questions. Congressional Research Service 17 link to page 29 link to page 29 Medicare Part B: Enrollment and Premiums P.L. 108-173)86 required that, beginning in 2007, high-income enrollees pay higher premiums.87 required that, beginning in 2007, high-income enrollees pay higher premiums.⁸² About 7% of Medicare Part B enrollees are expected to pay these higher premiums in 2020.⁸³

2021.88 Adjustments, known as income-related monthly adjustment amounts (IRMAA), are made to the standard Part B premiums for high-income beneficiaries, with the share of expenditures paid by beneficiaries increasing with income. This share ranges from 35% to 85% of the value of Part B B coverage. In 20202021, individuals whose incomes exceed $8788,000 and couples whose combined income exceeds $174176,000 are subject to higher premium amounts.⁸⁴89 The hold-harmless provision that prevents a beneficiary'’s Social Security benefits from decreasing from one year to the next as a result of the Part B premium increase does not apply to those subject to an income-related increase in their Part B premiums. (See "“Protection of Social Security Benefits from Increases in Medicare Part B Premiums.")

”) Determination of Income

To determine those subject to the high-income premium, Social Security uses the most recent federal tax return provided by the Internal Revenue Service. In general, the taxable year used in determining the premium is the second calendar year preceding the applicable year. For example, the 2020the 2019 tax return (20182019 income) was used to determine who would pay the 20202021 high-income premiums.⁸⁵

premiums.90 The income definition on which the high-income premiums are based is modified adjusted gross income (MAGI),⁸⁶91 which is different from gross income. Specifically Specifical y, gross income is all al income from all al sources, minus certain statutory exclusions (e.g., nontaxable Social Security benefits).⁸⁷ 92 From gross income, adjusted gross income (AGI)⁸⁸93 is calculated to reflect a number of deductions, including trade and business deductions and losses from sale of property. MAGI is defined as AGI plus certain foreign-earned income and tax-exempt interest.⁸⁹

94 86 T he Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA; P.L. 108-173) would have phased in the increase over five years; however, the Deficit Reduction Act of 2005 (DRA; P.L. 109-171) shortened the phase-in period to three years. 87 At the time of enactment of the MMA, CBO estimated that 1.2 million persons (3% of beneficiaries) would pay higher premiums in 2007 and that 2.8 million persons (6% of beneficiaries) would pay higher premiums in 2013. CBO further estimated that the MMA provision would reduce federal outlays by $13. 3 billion over the 2007-2013 period. CBO estimated that the DRA provision accelerating the phase-in would increase premium collections by $1.6 billion over the 2007-2010 period. T he MMA estimate and the DRA estimate were made by CBO at the time of enactmen t of each law. Both estimates were based on the CBO budget baseline in effect at the time. As is the case for all CBO estimates, the earlier estimates are incorporated into subsequent CBO baselines. T herefore, the two savings estimates cannot be added together. 88 CMS, Fact Sheet, “2021 Medicare Parts A & B Premiums and Deductibles,” November 6, 2020. 89 For additional information, see SSA, Program Operations Manual System (POMS), Section HI 01101.000, “Medicare Income-Related Monthly Adjustment Amount ,” at https://secure.ssa.gov/apps10/poms.nsf/lnx/0601101000. 90 If an enrollee amended his or her tax return and doing so changed the income used to determine the high -income adjustments, t he updated information may be provided to the Social Security Administration so that the administration may correct or remove the income-related monthly adjustment amounts. 91 Defined at Social Security Act §1839(i)(4). See also SSA, Program Operations Manual System (POMS), Section HI 01101.010, “Modified Adjusted Gross Income (MAGI),” at https://secure.ssa.gov/poms.nsf/lnx/0601101010. 92 Internal Revenue Code §61. 93 Internal Revenue Code §62. 94 T he definition of MAGI for the income-related monthly adjustment amount (IRMAA) in Medicare is different from the MAGI definition in certain ACA Medicaid provisions. See CRS Report R43861, The Use of Modified Adjusted Gross Incom e (MAGI) in Federal Health Program s. Congressional Research Service 18 Medicare Part B: Enrollment and Premiums If a person had a one-time increase in taxable income in a particular year (such as from the sale of income-producing property), that increase would be considered in determining the individual's ’s total income for that year and thus his or her liability for the income-related premium two years ahead. It would not be considered in the calculations for future years.

In the case of certain major life-changing events that result in a significant reduction in MAGI, an individual individual may request to have the determination made for a more recent year than the second preceding year.⁹⁰95 Major life-changing events include (1) death of a spouse; (2) marriage; (3) divorce or annulment; (4) partial or full work stoppage for the individual or spouse; (5) loss by individual individual or spouse of income from income-producing property when the loss is not at the individual'individual’s direction (such as in the case of a natural disaster); and (6) reduction or loss for individual individual or spouse of pension income due to termination or reorganization of the plan or scheduled cessation of the pension.⁹¹96 Certain types of events, such as those that affect expenses but not income or those that result in the loss of dividend income because of the ordinary risk of investment, are not considered major life-changing events.⁹²

97 If Medicare enrollees disagree with decisions regarding their IRMAAs, they may file an appeal with Social Security.⁹³98 Enrollees may either submit a "“Request for Reconsideration"⁹⁴”99 or contact their local Social Security office to file an appeal. (An enrollee does not need to file an appeal if he or she is requesting a new decision based on a life-changing event described above or if the enrollee has shown that Social Security used the wrong information to make the original decision.)

Income Categories and Premium Adjustments

Depending on their level of income, Medicare beneficiaries may be classified into one of six income categories.⁹⁵ In 2020100 In 2021, individuals with incomes less than $8788,000 a year ($174176,000 for a couple) pay the standard premium, which is based on 25% of the average Part B per capita cost. Individuals with incomes over $8788,000 per year and couples with combined income over $174$176,000 per year pay a higher percentage of Part B costs. Depending on one'’s level of income over these threshold amounts, premiums may be adjusted to cover 35%, 50%, 65%, 80%, or 85% of the value of Part B coverage (with the rest being subsidized through federal general revenues).⁹⁶ Additionally101 Additional y, high-income individuals pay surcharges ranging from $4.20 to $10.20 per month to offset increased federal spending in 20202021 due to premium reductions under BBA 15 and the Continuing Appropriations Act, 2021 and Other Extensions Act (P.L. 116-159) (compared to a $3.00 surcharge for those who pay the standard premium). (See “Determining the Part B Premium.”) In 2021In 2020, total IRMAAs for the five high-income levels, including the additional BBA 15 surcharges, are $57.80, $144.60, $231.40, $318.10, and $347.00 respectively.

The income categories and associated premiums for 2020, including the applicable BBA 15 repayment surcharges, are shown below in Table 2.59.40, $148.50, $237.60, $326.70, and $356.40 respectively. 95 Social Security Form SSA-44, at https://www.ssa.gov/forms/ssa-44-ext.pdf. 96 20 C.F.R. §418.1205. 97 20 C.F.R. §418.1210. 98 See SSA publication, What You Can Do if You Think Your Medicare Income-Related Premium is Incorrect, at https://www.ssa.gov/pubs/EN-05-10125.pdf. 99 Social Security Form SSA-561-U2, at http://www.ssa.gov/online/ssa-561.pdf. 100 Social Security Act §1839(i). 101 In 2020, approximately 4.6 million beneficiaries paid high-income premiums. About 36% of these were in the first (lowest) income tier, 22% in the second, 12% in the third, about 2 4% in the fourth, and about 6% in the highest tier. Figures provided by CMS, May 2021. Congressional Research Service 19 link to page 24 link to page 24 link to page 24 link to page 25 Medicare Part B: Enrollment and Premiums The income categories and associated premiums for 2021, including the applicable BBA 15 repayment surcharges, are shown below in Table 2. When both members of a couple are enrolled When both members of a couple are enrolled in Part B, each pays the applicable premium amount.

($148.50). Married persons who lived with their spouse at some point during the year but who filed separate returns are subject to different premium amounts. The Such individuals may pay higher premiums at lower income thresholds compared with those married couples who file joint tax returns.102 The income levels and premium amounts are shown inin Table 3. 102 T he different methodology for setting Medicare premiums for married filing separately was in the originating legislation that created the high-income premiums for Part B (§811 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, P.L. 108-173, adding §1839(i)(3)(C)(iii) to the Social Security Act ). T he difference in treatment between married filing jointly vs. married filing separately mirrors current IRS rules. T he IRS sets up tax Congressional Research Service 20 link to page 25 link to page 26 Medicare Part B: Enrollment and Premiums Table 3. Part B Premium Adjustment for Married Beneficiaries Filing Separately for 2021 Beneficiaries Who Are Married Income-Related and Lived with Their Spouse at Monthly Total Monthly Any Time During the Year but Adjustment Premium File a Separate Tax Return from Amount (premium + Their Spouse with Income (IRMAA)a surcharge) Less Than or Equal to $88,000 n/a $148.50 Greater Than $88,000 and less $326.70 475.20 than $412,000 Greater than or equal to 356.40 504.90 $412,000 Source: CMS, “Medicare Program: Medicare Part B Monthly Actuarial Rates, Premium Table 3.

($148.50). Legislative Changes to Income Thresholds

The original provision establishing the Part B income-related premiums set the initial income threshold and high-income-level ranges. Prior to 2010, annual adjustments to these levels were based on annual changes in the consumer price index for urban consumers (CPI-U), rounded to the nearest $1,000. However, Section 3402 of the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) froze the income thresholds and ranges at the 2010 level through 2019 rather than allowingal owing them to rise with inflation.⁹⁷103 As a result, as incomes have increased with inflation, a greater share of Medicare enrollees are reachinghave reached the high-income thresholds and are paying the high-income premiums than would have been the case without this freeze.

Additionally, Additional y, beginning in 2018, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L. 114-10) changed the income thresholds of the top two income categories at that time.⁹⁸ time.104 Individuals with incomes between $133,500 and $160,000 per year are now inwere moved into the 65% applicable percentage category (which previously only applied to those with incomes between $160,000 and $214,000 in 2010-2017). The income threshold for the highest category at that time (80%) was changed to $160,000 (which previously applied to those earning $214,000 or more $214,000 in 2010-2017). The thresholds for the lower two income categories were not changed. (See Table 4.) brackets differently for married filing jointly and married filing separately; deductions and tax credits are also limited for those filing separately. 103 ACA §3402. Because more beneficiaries are expected to pay this higher premium over time and therefore reduce the amount of general revenues needed to fund Part B, CBO scored this provision as saving the federal government $25 billion over 10 years (FY2010-FY2019), at http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/113xx/doc11379/amendreconprop.pdf. 104 MACRA §402. See CRS Report R43962, The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L. 114-10). Congressional Research Service 21 link to page 26 link to page 26 link to page 26 link to page 26 link to page 26 link to page 24 link to page 45 link to page 45 link to page 26 Medicare Part B: Enrollment and Premiums Table 4. Changes to the Medicare High-Income Premium Thresholds: 2017 to 2020 Levels of Premium Beneficiaries Who Filed Individual Tax Beneficiaries Who Filed Joint Tax Returns Adjustment and Returns with Income: with Income: Percentage of Costs Covered by Premiums 2017 2018 2019 2020a 2017 2018 2019 2020a Standard (25%) Less than Less than Less than Less than Less than Less than Less than or equal or equal or equal Less than or equal or equal or equal or equal to to to or equal to to to to to $85,000 $85,000 $85,000 $87,000 $170,000 $170,000 $170,000 $174,000 High Income Level 1 (35%) $85,001b- $85,001- $85,001- $87,001- $170,001- $170,001- $170,001- $174,001- $107,000 $107,000 $107,000 $109,000 $214,000 $214,000 $214,000 $218,000 Level 2 (50%) $107,001- $107,001- $107,001- $109,001- $214,001- $214,001- $214,001- $218,001- $160,000 $133,500 $133,500 $136,000 $320,000 $267,000 $267,000 $272,000 Level 3 (65%) $160,001- $133,501- $133,501- $136,001- $320,001- $276,001- $267,001- $272,001- $214,000 $160,000 $160,000 $163,000 $428,000 $320,000 $320,000 $326,000 Level 4 (80%) More than More than $160,001- $163,001- More than More than $320,001- $326,001- $214,000 $160,000 $499,999 $499,999 $428,000 $320,000 $749,999b $749,999b Level 5 (85%) $500,000 $500,000 $750,000 $750,000 n/a n/a or more or more n/a n/a or more or more Source: CMS, Annual Notices, “Medicare Program; Medicare Part B Monthly Actuarial Rates, Premium Rate, and Annual Deductible,”Table 4.)

With the exception of the addition of a new top threshold category described below, the 2019 income thresholds for the high-income categories were the same as in 2018. For years 2020 and after, the thresholds will be adjusted annuallyare adjusted annual y for inflation based on the new (2018 and 2019) threshold levels.⁹⁹

105 Section 53114 of the Bipartisan Budget Act of 2018 (BBA 18; P.L. 115-123) added an additional high-income category beginning in 2019 for individuals with annual income of $500,000 or more or couples filing jointly with income of $750,000 or more. (SeeSee Table 4.) Enrollees with income equal to or exceeding these thresholds pay premiums that cover 85% of the average per capita cost of the Parts B and D benefits instead of 80%. The threshold for couples filing jointly in this new income tier is calculated as 150% of the individual income level rather than 200% as in the 105 Under prior law (ACA §3402), in 2020 and subsequent years, the income thresholds were to be indexed to inflation as if they had not been frozen between 2011 and 2019. In other words, the income thresholds would have revert ed to the levels they would have reached had they been indexed for inflation since 2007, thereby reducing the proportion of beneficiaries who would be subject to higher premiums. CBO est imated that MACRA §402 would save $34.3 billion over 10 years. CBO, Cost Estim ate of H.R. 2, Medicare Access and CHIP Reauthorization Act of 2015 , March 25, 2015, https://www.cbo.gov/publication/50053. Congressional Research Service 22 Medicare Part B: Enrollment and Premiums income level rather than 200% as in the other income tiers. This new top income threshold will wil be frozen through 2027 and will be adjusted annuallywil be adjusted annual y for inflation starting in 2028 based on the CPI-U.¹⁰⁰

106 Premium Assistance for Low-Income Beneficiaries

Medicare beneficiaries with limited incomes and resources may be able to qualify for assistance with their premiums and other out-of-pocket expenses.¹⁰¹107 About one in five Medicare beneficiaries receives Part B premium subsidies.

Medicare beneficiaries who qualify for full Medicaid benefits (full dual-eligibles) have most of their health care expenses paid for by either Medicare or Medicaid. For these individuals, Medicaid covers the majority of Medicare premium and cost-sharing expenses, and it supplements Medicare by providing coverage for services not covered under Medicare, such as dental services and long-term services and supports. In cases where services are covered by both Medicare and Medicaid, Medicare pays first and Medicaid picks up most of the remaining costs. Each state has different rules about eligibility and applying for Medicaid.¹⁰²

108 Beneficiaries who do not meet their respective state'’s eligibility criteria for Medicaid may still stil qualify for assistance with Part B premiums if they have incomes of less than 135% of the federal poverty level (FPL) and assets of less than $7,860970 for an individual or $11,800960 for a couple in 2020.¹⁰³2021.109 These assistance programs are commonly referred to as Medicare Savings Programs (MSPs).¹⁰⁴110 Three of these programs provide assistance with Part B premiums. The type of assistance is based on a beneficiary'’s level of income.

Qualified Medicare Beneficiaries

Aged or disabled persons with incomes at or below FPL may qualify for the Qualified Medicare Beneficiary (QMB) program.¹⁰⁵ In 2020111 In 2021, the QMB monthly qualifying income levels are $1,084 for individuals and $1,457 for a couple (annual income of about $13,008 and $17,484, respectively).¹⁰⁶094 106 T hese threshold changes also apply to Part D income-related monthly adjustments. CBO estimated that the changes in this provision would save approximately $1.6 billion from 2018 to 2027. CBO, “ Direct Spending and Revenue Effects of Division E of Senate Amendment 1930, the Bipartisan Budget Act of 2018 ,” February 8, 2018, at https://www.cbo.gov/publication/53557. 107 See Medicare.gov, “Medicare Savings Programs,” at http://www.medicare.gov/your-medicare-costs/help-paying-costs/medicare-savings-program/medicare-savings-programs.html and Medicare Publication, “ Get Help with Your Medicare Costs,” at https://www.medicare.gov/pubs/pdf/10126-Getting-Help-With-Your-Medicare-Costs.pdf. Subsidies are also available for low-income beneficiaries enrolled in Part D, the outpatient prescription drug benefit. T hose who are eligible for assistance with Part B premiums through their Medicaid programs are automatically eligible to receive the Part D low-income subsidy. Other low-income beneficiaries with incomes below 150% of the federal poverty level (FPL) and who meet the resource tests may also be eligible for the drug subsidy. 108 See CRS Report R43357, Medicaid: An Overview. In those states that have extended Medicaid coverage to individuals 64 years of age and under with incomes of up to 138% of FPL, certain individuals at the higher income levels may no longer qualify for Medicaid when they turn 65. In other words, traditional Medicaid categorical and income eligibility (i.e., income and asset) rules will apply when an individual becomes eligible for Medicare. 109 Income and asset requirements may vary by state and change each year. T hese amounts do not include a burial-fund allowance of $1,500 per person. Medicare.gov, “ Medicare Savings Programs,” at http://www.medicare.gov/your-medicare-costs/help-paying-costs/medicare-savings-program/medicare-savings-programs.html. 110 For additional information about these programs and to learn whether a beneficiary might qualify for Medicare premium assistance, contact the applicable State Medical Assistance (Medicaid) office. (As the names of these programs may vary by state, one should specifically inquire about Medicare Savings Programs.) T he contact information for state Medicaid offices may be obtained by calling 1 -800-MEDICARE (1-800-633-4227) or by visiting the Medicare “ contacts” website at http://www.medicare.gov/contacts. 111 FPLs for 2021 are $12,880 per year for an individual and $17,420 for a couple. (T hese levels are slightly higher in Congressional Research Service 23 link to page 29 Medicare Part B: Enrollment and Premiums for individuals and $1,472 for a couple (annual income of about $13,128 and $17,664, respectively).112 QMBs are entitled to have their Medicare Parts A and B cost-sharing charges, including the Part B premium and all al deductibles and coinsurance, paid by Medicaid.¹⁰⁷113 (See Table 5.) For QMBs, Medicaid coverage is limited to the payment of Medicare premiums and cost-sharing charges (i.e., the Medicare beneficiary is not entitled to coverage of Medicaid plan services, unless the individual is otherwise entitled to Medicaid).

Specified Low-Income Medicare Beneficiaries

Individuals whose income is more than 100% but less than 120% of FPL may qualify for assistance as a Specified Low-Income Medicare Beneficiary (SLMB). In 20202021, the monthly income limits are $1,296308 for an individual and $1,744762 for a couple (annual income of about $15,552696 and $20,92821,144 respectively).¹⁰⁸114 Medicaid pays the Medicare Part B premiums for SLMBs, but not other cost sharing.

Qualifying Individuals

Individuals whose income is between 120% and 135% of FPL may qualify for assistance as Qualifying Individuals (QIs). In 20202021, the monthly income limit for a QI is $1,456469 for an individual, and for a couple, it is $1,960980 (annual income of about $17,472628 and $23,520, 760, respectively). Medicaid protection for these individuals is limited to payment of the monthly Medicare Part B premium. Expenditures under the QI program are, however, paid for (100%) by the federal government from the Medicare SMI Trust Fund up to the state's allocation level.¹⁰⁹ A ’s al ocation level.115 A state is required to cover only the number of people that would bring the state'’s spending on these population groups in a year up to its allocational ocation level. Any expenditures beyond that level are voluntary and paid entirely by the state.

Funding for the QI program was first made available by the Balanced Budget Act of 1997 (BBA97; P.L. 105-33).¹¹⁰).116 Subsequent legislation extended the program and the amounts available through allocation.¹¹¹ MACRA through al ocation.117 MACRA permanently extended the QI program.118 Alaska and Hawaii.) See The 2021 HHS Poverty Guidelines at https://aspe.hhs.gov/poverty-guidelines. 112 T he qualifying levels are slightly higher than the monthly federal poverty level because, by law, $20 per month of unearned income is disregarded in the calculation. See “ Medicare Savings Programs,” at https://www.medicare.gov/your-medicare-costs/get-help-paying-costs/medicare-savings-programs. 113 T he Qualified Medicare Beneficiary (QMB) program does not provide assistance with drug costs. Low-income beneficiaries who qualify for a Medicare Savings Program are automatically enrolled in Medicare Part D; their premiums and most cost sharing are paid for by the Part D low-income subsidy, which is financed through Medicare. States pay some of the costs for Part D low-income assistance through state transfer payments. 114 T he qualifying levels are calculated the same way as for the QMB program. 115 In general, Medicaid payments are shared between the federal government and the states according to matching formulas. 116 §4732(c) of BBA 97 added §1933(c) of the Social Security Act. 117 See CRS Report R43958, Health Care-Related Expiring Provisions, First Session of the 114th Congress. 118 MACRA appropriated $535 million for the remainder of CY2015 (April 1, 2015, through December 31, 2015) and $980 million for CY2016. T he amount of funding for CY2017 and subsequent calendar years is based on the product of the following: (1) the previous year’s Qualifying Individuals (QI) allocation; (2) the increase from the previous year in Medicare Part B premium; and (3) the estimated increase from the previous year in Part B en rollment. See CRS Report R43962, The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L. 114 -10). Congressional Research Service 24 link to page 29 link to page 29 link to page 29 link to page 29 link to page 29 link to page 29 Medicare Part B: Enrollment and Premiums Table 5. 2021 Medicare Savings Program Eligibility Standards Monthly Incomea Resourcesb Benefits Qualified Medicare At or Below 100% FPLc $7,970 (single) Part B Premiumd Beneficiary (QMB) $1,094 (single) $11,960 (couple) Coverage of Parts A and B $1,472 (couple) Deductibles and Coinsurance Specified Low-Income Above 100% but Less Than $7,970 (single) Part B Premium Medicare Beneficiary 120% FPLc $11,960 (couple) (SLMB) $1,094-$1,308 (single) $1,472-$1,762 (couple) Qualifying Individual At or Above 120% but Less $7,970 (single) Part B Premium (QI) Than 135% FPLc $11,960 (couple) $1,308-$1,469 (single) $1,762-$1,980 (couple) Source: Medicare.gov, “Medicare Savings Programs,” permanently extended the QI program.¹¹²

Protection of Social Security Benefits from Increases in Medicare Part B Premiums

After a person becomes eligible to receive Social Security benefits, his or her monthly benefit amount is adjusted annuallyannual y to compensate for increases in the prices of goods and services over time.¹¹³119 Near the end of each year, the Social Security Administration announces the cost-of-living living adjustment (COLA) payable in January of the following year. The amount of the COLA is based on inflation as measured by the Consumer Price Index-Urban Wage Earners and Clerical Workers (CPI-W).¹¹⁴120 If the CPI-W decreases, Social Security benefits stay the same—benefits are not reduced during periods of deflation.

When the annual Social Security COLA is not sufficient to cover the standard Medicare Part B premium increase, most Medicare beneficiaries are protected by a hold--harmless provision in the Social Security Act.¹¹⁵ Specifically 119 For more information, see CRS Report R42035, Social Security Primer, and CRS Report 94-803, Social Security: Cost-of-Living Adjustm ents. 120 T he Consumer Price Index-Urban Wage Earners and Clerical Workers (CPI-W) tracks the prices of a fixed market basket of goods and services over time. Social Security’s cost-of-living adjustment (COLA) is calculated as the change in the CPI-W from the third quarter of the prior calendar year to the third quarter of the current c alendar year. If the CPI-W increases during this period, Social Security benefits for the next year increase proportionately. Congressional Research Service 25 link to page 51 Medicare Part B: Enrollment and Premiums Social Security Act.121 Specifical y, if in a given year the increase in the standard Part B premium would cause a beneficiary'’s Social Security check to be less, in dollar terms, than it was the year before, then the Part B premium is reduced to ensure that the amount of the individual'’s Social Security check does not decline.¹¹⁶122 This determination is made by the Social Security Administration.

Administration. To be held harmless in a given year, a Social Security beneficiary must have received Social Security benefit checks in both December of the previous year and January of the current year, and the beneficiary must also have had Part B premiums deducted from both checks.¹¹⁷123 The hold- harmless provision operates by comparing the net dollar amounts of the two monthly benefit payments; if the net Social Security benefit for January of the current year is lower than in December of the previous year, then the hold-harmless provision applies to that person. Premiums of those held harmless are then reduced to an amount that would not cause their Social Security benefits to decline in the next year. The premium paid by those held harmless is called the Variable cal ed the Variable Supplementary Medical Insurance premium.¹¹⁸124 Those not held harmless pay the standard premium as determined for that year.

Typically Typical y, the hold-harmless provision affects only a small smal number of beneficiaries and has had minimal impact on Part B financing.¹¹⁹125 In most years, this rule primarily protects those with relatively low Social Security payments. However, in years in which there is no or a very low Social Security COLA, such as in 2010, 2011, 2016, and 2017, a large number of beneficiaries may be protected by this provision. (See "Application of the Hold-Harmless Rule in Years Prior to 2016," "Application of the Hold-Harmless Rule in 2016," and "Application of the Hold-Harmless Rule in 2017.")

See Appendix E.) Some Beneficiaries Are Not Protected by the Hold-Harmless Provision

Not all Harmless Provision Not al beneficiaries are protected by the hold-harmless provision and, under some circumstances, may be subject to significantly higher premiums than those who are held harmless. Groups that are not protected include the following:

• Higher-Income Beneficiaries  Higher-Income Beneficiaries. Higher-income beneficiaries who are required to pay income-related Part B premiums are explicitly excluded by law from 121 Social Security Act §1839(f). T his provision was originally created by the Deficit Reduction Act of 1984 (P.L. 98-369, Section 2302), extended by subsequent legislation, and made permanent by the Catastrophic Coverage Act of 1988 (P.L. 100-360, Section 211(b)) (this provision was not repealed when that law was repealed in 1989). T hose who receive RRB benefits are also protected by this provision. T he hold-harmless provision was first implemented in January 1987. 122 For more information on t he hold-harmless provision, see CRS Report R44224, Potential Impact of No Social Security COLA on Medicare Part B Prem ium s in 2016 . 123 Note that Social Security benefit checks reflect benefit entitlements for the previous month, whereas Part B premiums are deducted in advance. For example, a November Social Security benefit check is not received until December, but it has December’s Part B premium deducted from it. 124 SSA, Program Operations Manual System (POMS), Section HI 01001.004, “The Variable Supplementary Medical Insurance Premium,” at https://secure.ssa.gov/poms.nsf/lnx/0601001004. 125 T he hold-harmless provision is applied on a case-by-case basis. For example, in a given year a Social Security COLA applied to most benefit levels may be sufficient to cover the dollar amount of a Part B premium increase for most beneficiaries; however, it may not be sufficient to fully cover the increase for someone who receives a smaller benefit amount, (i.e., the COLA percentage is applied to a smaller number, and the resulting dollar increase may not be sufficient to fully cover the Part B premium increase). In such a case, the hold-harmless provision would apply to that individual, and his or her Part B premiums may be lower than th ose paid by most beneficiaries in a given year. T hus, the hold-harmless provision may apply to a small number of beneficiaries each year . Congressional Research Service 26 link to page 21 link to page 21 link to page 27 link to page 27 Medicare Part B: Enrollment and Premiums protection under the hold-harmless provision. They are required to pay the full amount of any increase in their Part B premiums. (See “Income-Related Premiums.”)  Lower-Income Beneficiaries. Lower-income beneficiaries who receive premium assistance from Medicaid are not held harmless as their premiums are not deducted from their Social Security benefits. However, the Medicaid program pays the full amount of any increase in their Part B premiums. (See “Premium Assistance for Low-Income Beneficiaries.”)  Those Who Do Not Receive Social Security. This group includes those who have not yet signed up for Social Security for various reasons, for example because they have deferred signing up because they have not reached full retirement age126 or are stil working. It also includes disabled beneficiaries whose Social Security Disability Insurance (SSDI) cash benefits have been discontinued because they have returned to work but who are stil eligible for Medicare.127 Additional y, those who receive benefits exclusively through a different retirement plan are not held harmless.128 This group includes certain federal retirees under the Civil Service Retirement System129 as wel as certain state and local government workers—such as teachers, law-enforcement personnel, and firefighters—who have their own pension programs.130  Those Who Did Not Have Medicare Premiums Deducted from Their Social Security Checks at the End of One Year and the Beginning of the Next. This category includes those who enroll in Social Security or Medicare during the year in which the hold-harmless provision is in effect, including SSDI recipients who become eligible for Medicare that year after the 24-month waiting period.131 It also includes those who had Medicare premiums paid on their behalf one year, for example by Medicaid, but lost that coverage during the next year. 126 See CRS Report R44670, The Social Security Retirement Age. 127 See CRS Report R41934, Ticket to Work and Self-Sufficiency Program: Overview and Current Issues; SSA, “ T he Redbook – A Guide to Work Incentives,” at https://www.ssa.gov/redbook/; and SSA, Disability Benefits For Wounded Warriors, pp. 13-14, at http://www.ssa.gov/pubs/EN-05-10030.pdf. Disabled military personnel may be required to enroll in Part B to maintain coverage under the Department of Defense health insurance, T RICARE. Some persons with low incomes and limited resources may be eligible for state assistance with these costs under various Medicare Savings Programs. 128 A person who is entitled to Social Security spousal benefits, based on a spouse’s work record instead of his or her own work record, may or may not be covered by the hold-harmless provision. If the government pension offset (GPO) were to reduce spousal benefits to zero, then the individual would not meet the hold-harmless provision’s requirement of having benefit checks for December of the previous year and January of the current year. T her efore, this person would not be held harmless. If the person were to receive a Social Security spousal benefit for a positive dollar amount, then he or she would be covered by the hold-harmless provision. For more on the GPO, see CRS Report RL32453, Social Security: The Governm ent Pension Offset (GPO) . 129 Federal employees who exclusively worked under the Civil Service Retirement System (CSRS) are not eligible for Social Security benefits based on their own work record. See CRS Report 98-810, Federal Em ployees’ Retirem ent System : Benefits and Financing. T his program uses the same measuring period and formula for determining its COLAs as Social Security. See CRS Report 94-834, Cost-of-Living Adjustm ents for Federal Civil Service Annuities. 130 SSA, “ How State and Local Government Employees Are Covered by Social Security and Medicare,” at http://www.ssa.gov/pubs/EN-05-10051.pdf, and Social Security Administration, “ State and Local Government Employers – Information,” at http://www.ssa.gov/slge/. 131 See CRS Report RS22195, Social Security Disability Insurance (SSDI) and Medicare: The 24 -Month Waiting Period for SSDI Beneficiaries Under Age 65 . Congressional Research Service 27 link to page 12 link to page 51 link to page 40 link to page 34 link to page 21 Medicare Part B: Enrollment and Premiums Some people protected by the hold-harmless provision may stil see a decrease in their Social Security checks due to an increase in Medicare Part D premiums. Part D premiums are not covered by the hold-harmless provision, although beneficiaries with low-income subsidies would not be affected. Additional y, those who pay the late-enrollment penalty are not fully protected from the hold-harmless rule. (See “Late-Enrollment Premium Penalty and Exemptions.”) In a year in which the hold-harmless provision is in effect, the late-enrollment surcharges are calculated as a percentage of the premiums of those not held harmless. These surcharges are considered “nonstandard” premiums and thus are not limited by the hold-harmless provision. Application of the Hold-Harmless Rule in 2021 In 2021, the growth in Medicare premiums was limited by the Continuing Appropriations Act, 2021 and Other Extensions Act (P.L. 116-159); therefore the 1.3% Social Security COLA for 2021 was large enough to cover the full $3.90 increase in Part B premiums (from $144.60 to $148.50 per month) for most beneficiaries, and only 2% (about 1.2 mil ion)132 are being held harmless in 2021.133 (A summary of how the hold-harmless provision has been applied in prior years may be found in Appendix E.) Potential Application of the Hold-Harmless Rule in 2022 The extent to which the hold-harmless rule may apply in 2022pay income-related Part B premiums are explicitly excluded by law from protection under the hold-harmless provision. They are required to pay the full amount of any increase in their Part B premiums. (See "Income-Related Premiums.")
• Lower-Income Beneficiaries. Lower-income beneficiaries who receive premium assistance from Medicaid are not held harmless as their premiums are not deducted from their Social Security benefits. However, the Medicaid program pays the full amount of any increase in their Part B premiums. (See "Premium Assistance for Low-Income Beneficiaries.")
• Those Who Do Not Receive Social Security. This group includes those who have not yet signed up for Social Security for various reasons, for example because they have deferred signing up because they have not reached full retirement age¹²⁰ or are still working. It also includes disabled beneficiaries whose Social Security Disability Insurance (SSDI) cash benefits have been discontinued because they have returned to work but who are still eligible for Medicare.¹²¹ Additionally, those who receive benefits exclusively through a different retirement plan are not held harmless.¹²² This group includes certain federal retirees under the Civil Service Retirement System¹²³ as well as certain state and local government workers—such as teachers, law-enforcement personnel, and firefighters—who have their own pension programs.¹²⁴
• Those Who Did Not Have Medicare Premiums Deducted from Their Social Security Checks at the End of One Year and the Beginning of the Next. This category includes those who enroll in Social Security or Medicare during the year in which the hold-harmless provision is in effect, including SSDI recipients who become eligible for Medicare that year after the 24-month waiting period.¹²⁵ It also includes those who had Medicare premiums paid on their behalf one year, for example by Medicaid, but lost that coverage during the next year.

Application of the Hold-Harmless Rule in Years Prior to 2016

Application of the Hold-Harmless Rule in 2016

Absent legislation, the premiums of those not held harmless (the remaining 30%) would have been higher than the premiums would have been had the hold-harmless provision not been in effect.¹³² However, BBA 15 mitigated the expected large increases for those not held harmless and required that their premiums be calculated as if the hold-harmless rule were not in effect. BBA 15 also required that a monthly surcharge of $3.00 be added to standard premiums (more for those with high incomes) until the increased cost to the federal government of reducing the premiums is offset. (See Appendix D.) The total standard premium amount for those Part B enrollees not held harmless in 2016, including the $3.00 per month surcharge, was $121.80.¹³³

Application of the Hold-Harmless Rule in 2017

Application of the Hold-Harmless Rule in 2018

In 2018, there was a 2.0% Social Security COLA and no increase in the 2018 Medicare Part B premiums (i.e., the Part B premium was $134.00 per month in both 2017 and 2018).¹³⁹ For many Part B enrollees who were held harmless in 2017, the Social Security COLA was large enough to cover the difference between the full Medicare premium of $134.00 and the reduced premium amount they paid in 2017. Therefore, many of those held harmless in 2017 no longer saw reduced premiums in 2018 and returned to paying the standard premium amounts (which include the $3.00 BBA 15 surcharge).

Application of the Hold-Harmless Rule in 2019 and 2020

Potential Application of the Hold-Harmless Rule in 2021

The extent to which the hold-harmless rule may apply in 2021 depends on a number of factors including expectations of growth in per capita Part B costs in 20212022, the extent to which contingency reserves in the SMI trust fund may need to be replenished,¹⁴⁴134 and the amount of the 20212022 Social Security COLA. In their 2020 report (which does not reflect the potential effects of the the 2020 COVID-19 public health emergency),¹⁴⁵135 the Medicare trustees projected that 20212022 Part B premiums would be about $153.30157.70 per month, an increase of $8.709.20 from the 20202021 premium amountamount ($148.50). Under this projection, in the event of no or a very small 2021smal 2022 Social Security COLA, it is possible that a greater portion of Medicare Part B enrollees could be held harmless in 20212022 than in 20202021. Under such circumstance, similar to years such as 2010 and 2011 when the hold-harmless provision was more broadly applicable, the approximately 30% of Part B enrollees not protected by the hold-harmless provision could pay higher premiums than they would have had the hold-harmless provision not been in effect.

Part B Premiums over Time

Part B premium changes over time generallygeneral y reflect the growth in total Part B expenditures, although the exact relationship between Part B expenditures covered by the Part B premium has been changed by statute at various points. (SeeSee Appendix A.) The standard monthly Part B premium has risen from $3.00 in 1966 to $144.60 in 2020. (See148.50 in 2021. (See Figure 1.) For comparison, during a similar time period, average annual Part B benefit costs per beneficiary have increased 132 Figures provided to CRS by CMS, May 2021. 133 T he average monthly Social Security payment for retirees in December 2020 prior to the application of the 2021 COLA was $1,544. At this payment level, a 1.3% COLA resulted in an increase of $20 per month, which more than covered the $3.90 Part B premium increase. SSA, Social Security Basic Facts, as of December 2020, at https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf. 134 See “Contingency Margin.” 135 See CRS Report R46219, Overview of U.S. Domestic Response to Coronavirus Disease 2019 (COVID-19). Congressional Research Service 28 link to page 29 link to page 48 Medicare Part B: Enrollment and Premiums from about $101.00 in 1970 (about $8.42 per month) to a projected $7,245from about $101.00 in 1970 (about $8.42 per month) to a projected $6,909 per beneficiary (about $575 $603.75 per month) in 2020.¹⁴⁶

2021.136 Prior to 2000, the Part B premium decreased from year to year twice. The first instance was from 1989 ($31.90) to 1990 ($28.60) as a result of the repeal of the Medicare Catastrophic Coverage Act of 1988 (P.L. 100-360). The second was from 1995 ($46.10) to 1996 ($42.50) as a result of the transition from a premium as determined by a fixed dollar amount under the Omnibus Reconciliation Act of 1990 (P.L. 101-508) to 25% of costs as directed under the Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66).

). Because of the absence of a Social Security COLA in 2010 and 2011, most beneficiaries were held harmless and paid the 2009 premium of $96.40 per month during those years. The standard 2010 and 2011 premiums, paid by those who were not held harmless, were thus higher than they would have been had the hold-harmless provision not been in effect. (See prior section "“Protection of Social Security Benefits from Increases in Medicare Part B Premiums"” for additional detail.) Similarly, due to no or low Social Security COLAs in 2016 and 2017, most Part B enrollees were protected by the hold-harmless provision and paid lower premiums in those years.

years. Since 2000, the standard Medicare Part B premium has more than tripled, from $45.50 in 2000 to the current premium of $144.60 in 2020148.50 in 2021. This growth has been due to a number of factors that have increased per capita Part B expenditures during that time, including the rising prices of health care services and equipment, new technologies, and increased utilization of Medicare Part B services.¹⁴⁷137 While Part B expenditure growth has slowed in recent years, the Medicare trustees project faster benefit spending growth from 2020 to 2025 (an 8.2% Part B average annual growth rate compared with a 6.9% growth rate over the prior five years).¹⁴⁸

138 The Medicare trustees estimate that 20212022 premiums will wil increase to about $153.30157.70 per month, and that premiums will wil increase thereafter at an average rate of about 5.48% per year through 2029.¹⁴⁹ 2029.139 (For estimates of premiums in future years through 2029, seesee Appendix C.)

136 2020 Medicare T rustees Report, T able III.C5. For data on recent growth in specific Part B services, see the 2020 Medicare T rustees Report, pp. 125-136. 137 2020 Medicare T rustees Report, pp. 125-136. 138 2020 Medicare T rustees Report, p. 7 and T able III.C5 on p. 87. T hese p rojections do not incorporate assumptions about the potential effects of the COVID-19 public health emergency. At this time, it is unclear what effect the pandemic will have on future Medicare Part B spending and on 202 2 premiums. 139 CRS calculation of compound average growth rate based on premium projections in T able V.E2 of the 2020 Medicare T rustees Report. Congressional Research Service 29 link to page 48 Medicare Part B: Enrollment and Premiums Figure 1. Monthly Medicare Part B Premiums Figure 1. Monthly Medicare Part B Premiums (1966-2029)

(1966-2029) Source: CRS figure, based on data from the 20202020 Annual Report of the Boards of Trustees of the Federal Hospital Insurance Insurance and Federal Supplementary Medical Insurance Trust Funds, April 22, 2020, Table V.E2 and CMS, "“Medicare Program: Medicare Part B Monthly Actuarial Rates, Premium Rate, and Annual Deductible Beginning January 1, 2020," 842021,” 85 Federal Register 6162571904, November 13, 2019. 12, 2020. Note: Premiums through 20202021 are actual; premiums from 20212022 to 2029 are estimates.

The projections do not reflect the potential impact of the COVID-19 pandemic or of related legislation enacted subsequent to the issuance of the 2020 Medicare Trustees report. Current Issues Current Issues

Premium Amount and Annual Increases

The Medicare trustees estimate that Medicare Part B premiums will wil increase from $144.60148.50 per month in 20202021 to about $234.10 in 2029.¹⁵⁰ (See140 (See Appendix C.) Rising Medicare premiums could have a large effect on Social Security beneficiaries, particularly on those who rely on Social Security as their primary source of income.¹⁵¹141 For example, in 20192017, Social Security benefits represented about 33% of the income of Americans aged 65 and older. About 50% of married couples and 70% of unmarried persons received more than half of their income from Social Security, and 21% of married couples and 45% of unmarried persons received more than 90% of 140 T he projections do not reflect the potential effects of the COVID-19 public health emergency. At this time, it is unclear what effect the pandemic will have on future Medicare Part B spending and premiums. 141 Other sources of income may include earnings from employment, employer -sponsored pension benefits, and investment earnings. In addition, retirees may draw down on their accumulated assets to supp lement their income. Congressional Research Service 30 link to page 45 link to page 48 Medicare Part B: Enrollment and Premiums their income from Social Security.142their income from Social Security.¹⁵² Some of these beneficiaries may see a decline in their standard of living as their Medicare premiums rise.

Once a person receives Social Security, his or her benefit is indexed to inflation and thereafter grows with annual Social Security COLAs.¹⁵³143 However, Medicare premiums are based on the per capita cost growth of Part B benefits, which reflects the growth in the cost of medical care and in the utilization and intensity of services used by beneficiaries, factors that have historicallyhistorical y grown faster than CPI-W. AdditionallyAdditional y, as there has been a continuing shift from providing care in inpatient (Part A) to outpatient settings (Part B), a greater portion of Medicare spending is expected to be covered by beneficiary premiums.¹⁵⁴144 This means that, over time, Medicare premiums are expected to represent a growing proportion of most beneficiaries'’ Social Security income.¹⁵⁵145 Since 2000, Social Security'’s annual COLA has resulted in a cumulative benefit increase of about 54%,55%,146 significantly less than the Part B premium growth of almost 220over 226%. The Medicare trustees estimate that average Part B plus Part D premiums will wil represent close to 12% of the average Social Security benefit in 2020 and will wil increase to an estimated 19% in 2094.¹⁵⁶ (See147 (See Appendix B andand Appendix C for historical, current, and projected Part B premiums.)

Additionally, Additional y, while the hold-harmless provision provides protection against increases in the Part B premium, the rule does not apply to Part D premiums or to late-enrollment penalties. Therefore, even in a year with a 0% or a very low Social Security COLA, beneficiaries may still stil see a decline in benefits as a result of increases in Part D premiums and/or any applicable late- enrollment penalties.

Impact of the Hold-Harmless Provision on Those Not Held Harmless

Harmless The law does not specify how Medicare Part B financing (premiums and general revenues) should be established in years in which the hold-harmless provision applies to a large number of Medicare beneficiaries. Under current law, the only way to generate enough premium revenue to cover 25% of Part B costs is to have those not held harmless shoulder the entire beneficiary share of any increase in premiums.¹⁵⁷148 Absent legislation, such as BBA 15, the premiums of those not held harmless can therefore be significantly greater than if there were no hold-harmless provision. 142 SSA, “Social Security Basic Facts,” as of December 2020, at https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf. 143 T he COLA increases the benefit s paid to current beneficiaries. In contrast, average Social Security benefits (those paid to new and current beneficiaries) have risen at a faster rate than the annual COLA, because the formula for calculating initial Social Security benefits is linked to wage growth, whereas the COLA is based on price growth. Generally, wages rise faster than prices. 144 In 2000, the ratio of Part A expenditures to Part B expenditures was 59:41. T his ratio decreased to 50:50 in 2014 and is expected to drop to 42:58 in 2029. T his means that over time, the proportion of Medicare expenditures covered under Part B is expected to increase. While providing more services on an outpatient basis may be more cost -effective for the program as a whole, it also means that beneficiaries will be expected to bear a larger portion of program costs over time. See CRS Report R43122, Medicare Financial Status: In Brief. 145 T he hold-harmless provision caps the annual Part B premium increase (but not the Part D increase) at the dollar amount of a beneficiary’s COLA. 146 CRS calculations based on SSA, Office of the Chief Actuary, “Cost -of-Living Adjustments,” at https://www.ssa.gov/oact/COLA/colaseries.html. 147 Similarly, average Medicare cost sharing is estimated to be about 12% of the Social Security benefit in 2020, and it is expected to increase to approximately 18% in 2094. 2020 Medicare T rustees Report, p. 36. 148 T he law does not specify that this method be used, but it also does not prohibit it. Congressional Research Service 31 Medicare Part B: Enrollment and Premiums held harmless can therefore be significantly greater than if there were no hold-harmless provision. As the Medicare trustees pointed out in their 2010 annual report, "“(t)his approach to preventing exhaustion of the Part B trust fund account is the only one available under current law,"” despite the "“serious equity issues"” that this method raises.¹⁵⁸

149 In years in which there has been both a 0% or a very low Social Security COLA and a Medicare premium increase, concerns have been raised about the potential financial impact of the premium increases on those not held harmless as well wel as on the state Medicaid agencies that pay Part B premiums on behalf of low-income beneficiaries. For example, individuals in retirement systems other than Social Security or RRB may also have not received a COLA but could face significantly higher Medicare premiums than those who qualified for protection under the hold-harmless provision.¹⁵⁹150 Some have proposed changes to the hold-harmless provision to avoid the disproportionate impact of premium increases on those not held harmless, such as holding all al Part B enrollees harmless in years in which there is no Social Security COLA¹⁶⁰ or allowingCOLA151 or al owing Social Security checks to decline as a result of Medicare premium increases in some years.¹⁶¹152 Others have proposed linking the Social Security COLA to a measure of inflation that is based on purchasing patterns of the elderly, such as the BLS'’s Experimental Consumer Price Index for Americans Aged 62 and Older (CPI-E)¹⁶²153 or requiring a minimum annual Social Security COLA.¹⁶³

COLA.154 Proposals to Modify the Late-Enrollment Penalty

Periodically Periodical y, proposals have been offered to modify or eliminate the Part B premium penalty either for all al enrollees or alternatively for a selected population group. As an increasing number of new Medicare-eligible beneficiaries must actively sign up for Medicare because they are not yet receiving Social Security benefits (e.g., their full retirement Social Security age exceeds the Medicare age of eligibility), there is concern that more people could become subject to late- 149 Boards of T rustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, 2010 Annual Report of the Boards of Trustees of the Federal Hosp ital Insurance and Federal Supplem ental Medical Insurance Trust Funds, August 5, 2010, pp. 97-98, at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-T rends-and-Reports/ReportsTrustFunds/downloads/tr2010.pdf. 150 For example, the annual increase in the CSRS benefits is tied to the same inflation measure as Social Security; therefore, those under this system also received a 1.3% COLA in 2021. 151 For example, S. 2148, the Protecting Medicare Beneficiaries Act of 2015, and H.R. 3696, the Medicare Premium Fairness Act, both introduced on October 7, 2015, would have kept the 2016 Part B premiums at the 2015 level for all beneficiaries, including those with high incomes. Late-enrollment surcharges also would have been based on the 2015 standard premium. T he loss of income from holding premiums flat in 2016 would have been offset by increased general revenue contributions. Note that these bills would have affected only premium determinations for 201 6 and would not have made permanent changes to the hold-harmless provision. 152 Charles Blahous, “How Social Security’s COLA Politics Lead to Bad Policy,” Economic Policies for the 21 st Century at the Manhattan Institute, November 22, 2015, at https://economics21.org/html/how-social-security%E2%80%99s-cola-politics-lead-bad-policy-1522.html. 153 T he CPI-E grows faster than the CPI-W, on average, because a larger portion of spending by the elderly goes toward health care expenditures and other items whose prices tend to rise more rapidly. As a result, switching to such a measure is projected to result in larger COLAs and higher Social Security benefits. See CRS Report R43363, Alternative Inflation Measures for the Social Security Cost-of-Living Adjustm ent (COLA). For example, introduced in the 116th Congress, the CPI for Seniors Act of 2019 (H.R. 2787), the Social Security 2100 Act (H.R. 860 and S. 269), and the Social Security Expansion Act (S. 478) would have required the use of the CPI-E in determining the Social Security COLA. 154 For example, in the 116th Congress, S. 1923, the Guaranteed 3 Percent COLA for Seniors Act of 2019, would have required a minimum 3% Social Security COLA each year. Also, in the 116 th Congress, H.R. 46, the Social Security Safety Dividend Act of 2019, would have guaranteed a $250 increase in benefits for any year that no COLA is payable. Congressional Research Service 32 link to page 51 Medicare Part B: Enrollment and Premiums there is concern that more people could become subject to late-enrollment penalties. For example, the Medicare Rights Center reported a large number of callscal s to its hotline related to transitioning to Medicare. Their report notes that "“(m)any individuals who call cal Medicare Rights are confused by Medicare enrollment rules, and specificallyspecifical y by decision-making related to taking or declining Part B"” and that "“Medicare-eligible people who do not understand Part B enrollment rules and fail to enroll in Medicare when they first became eligible may face late-enrollment penalties, gaps in coverage, and disruptions to access to needed care."¹⁶⁴

”155 Some proposals have suggested modifying the penalty provision to limit both the amount and the duration of the surcharge, as is the case for delayed Part A enrollment, which has a maximum 10% surcharge and a duration of twice the number of years that enrollment was delayed. (See Appendix E for information on the Part A premium and late-enrollment penalty.)

Some have also suggested that Medicare Part B have a creditable-coverage exemption, similar to that under Part D, that would allowal ow Medicare beneficiaries with equivalent coverage to postpone enrollment in Part B without being subject to a penalty. For example, under the Part D prescription drug benefit, individuals are not subject to a late-enrollment penalty if they have maintained "creditable"maintained “creditable” prescription drug coverage prior to enrollment—that is, coverage that is expected to pay at least as much as Medicare'’s standard prescription drug coverage.¹⁶⁵156 Creditable prescription drug coverage includes employer-based prescription drug coverage, qualified State Pharmaceutical Assistance Programs, and military-related coverage (e.g., Veterans Affairs health care system and TRICARE).¹⁶⁶

157 Other suggestions include formallyformal y training employers about Medicare coverage and interaction with other insurance; improving education on Medicare, including late-enrollment penalties, for those nearing Medicare-eligibility age; and expanding equitable relief to include remedies for actions based on misinformation provided by entities in addition to an agent of the federal government, such as an agent of state or local government, and/or an employer or insurer.

In recent Congresses, a number of billsbil s have been introduced that would address some of the issues associated with the Part B late-enrollment penalty. For example, in the 116^th117th Congress, H.R. 1788480 would limit the penalty to 15% and twice the period of no enrollment, and would exclude periods of COBRA (Consolidated Omnibus Budget Reconciliation Act) coverage, retiree, and VA coverage when determining the late enrollment penalty. Additionally, In the 116th Congress, H.R. 3417, H.R. 2477 and S. 1280 would requirehave required Medicare to provide advance notification to those approaching Medicare eligibility, restructure Medicare enrollment periods and coverage periods, and expand the eligibility for special enrollment periods for those who meet exceptional conditions as defined by the Secretary of HHS. Also introduced in the 116^th.158 Also introduced in the 116th Congress, H.R. 2564 and H.R. 1657 would have established a special Medicare Part B enrollment period for individuals enrolled in COBRA continuation coverage who elected not to enroll in Part B during their initial enrollment period. In the 115th Congress, H.R. 2564 and H.R. 1657 would establish a special Medicare Part B enrollment period for individuals enrolled in COBRA (Consolidated Omnibus Budget Reconciliation Act) continuation coverage who elected not to enroll in Part B during their initial enrollment period. In the 115^th Congress, H.R. 2342 would have required that employers notify employees about the availability H.R. 2342 would have required that employers notify 155 Medicare Rights Center, “Medicare T rends and Recommendations: An Analysis of 2015 Call Data from the Medicare Rights Center’s National Helpline,” March 2017, at https://www.medicarerights.org/pdf/2015-helpline-trends-report.pdf. (Their April 2019 analysis of 2017 call data may be found at https://www.medicarerights.org/2017-medicare-trends-recommendations.) The Medicare Rights Center also issued a related report entitled “ A Costly Mistake: Missing Part B Enrollment,” April 2015, at http://www.medicarerights.org/pdf/medicare-snapshot-040915.pdf. 156 See Medicare publication “Your Guide to Medicare Prescription Drug Coverage,” p.20, at https://www.medicare.gov/Pubs/pdf/11109-Your-Guide-to-Medicare-Prescrip-Drug-Cov.pdf. 157 42 CFR §423.56. Employers or unions may also qualify for a federal subsidy to maintain prescription drug coverage for their retirees. Such subsidies are generally less expensive to the federal government than providing full coverage to such enrollees under Part D. 2020 Medicare T rustees Report , T able IV.B9. 158 T hese bills also would have restructured Medicare enrollment and coverage periods and expanded the eligibility for special enrollment periods for those who met exceptional conditions as defined by the Secretary of HHS. T hose changes were included in t he Consolidated Appropriations Act, 2021 (P.L. 116-260; Division CC, §102) and will be effective in 2023. Congressional Research Service 33 link to page 21 Medicare Part B: Enrollment and Premiums employees about the availability of special enrollment periods to obtain marketplace coverage and Medicare coverage upon termination or separation. Additionally, Additional y, H.R. 707 would have, among other changes, eliminated late-enrollment penalties for those between the ages of 65 and 70.

As introduced in the 112^th112th Congress, in addition to creating a special enrollment period for those with COBRA coverage, H.R. 1654 would have created a continuous enrollment period that would have allowedal owed Medicare-eligible beneficiaries to sign up for Part B outside of the general enrollment period and to receive health coverage the following month. H.R. 1654 would have also expanded eligibility for equitable relief to those who based enrollment decisions on incorrect information provided by group health plans and plan sponsors, and it would have directed the Government Accountability Office to study problems with Part B enrollment.

Deficit Reduction Proposals

As Medicare currently represents about 1512% of federal spending,¹⁶⁷159 many proposals to reduce federal deficits include suggestions to reduce Medicare program spending and/or increase program income. For example, some proposals would increase Medicare premiums as a portion of total program funding, whereas others would limit the amount of federal contributions.

Increasing Medicare Premiums

Certain proposals suggest limiting premium increases to high-income beneficiaries. For example, the President'’s FY2017 budget proposal would have increased the percentage of per capita expenditures paid by high-income enrollees from 35% to 80% of expenditures to a range of between 40% and 90%, and it would have increased the number of high-income brackets from four to five.¹⁶⁸160 The proposal also would have continued the freeze on income thresholds until 25% of beneficiaries were subject to the high-income premiums. (Subsequent to that proposal, the BBA BBA 18 added a fifth high-income bracket with premiums set at 85% of per capita expenditures. See "Income-Related Premiums.")

See “Income-Related Premiums.”) Other proposals suggest increasing premiums paid by all al Part B enrollees. For example, a proposal introduced in 2011 by then-Senators Lieberman and Coburn¹⁶⁹Coburn161 suggested raising the standard Part B premium from the current 25% of program costs to 35% over five years.¹⁷⁰

162 Impose a Part B Premium Surcharge for Beneficiaries in Medigap Plans with Near First-Dollar Coverage

In 2017 In 2018, about 3534% of beneficiaries enrolled in traditional Medicare bought Medigap policies from private insurance companies that cover some or all al of Medicare'’s cost sharing.¹⁷¹ 163 159 T he federal spending amount is net of beneficiary premiums. CRS calculation based on data from CBO, Budget and Econom ic Outlook: 2021 to 2031, February 2021. 160 See Department of Health and Human Services, Fiscal Year 2017 Budget in Brief, p. 76, at http://www.hhs.gov/sites/default/files/fy2017-budget-in-brief.pdf. 161 A Bipartisan Plan to Save Medicare and Reduce Debt, June 28, 2011. 162 For additional information, see CBO, Options for Reducing the Deficit: 2021 to 2030, “Increase Premiums for Parts B and D of Medicare,” December 9, 2020, at https://www.cbo.gov/budget-options/56831. 163 America’s Health Insurance Plans (AHIP), State of Medigap 2020, Trends in Enrollments and Demographics, p. 3, July 7, 2020, at https://www.ahip.org/state-of-medigap-trends-in-enrollment-and-demographics/. Also see archived CRS Report R42745, Medigap: A Prim er. Congressional Research Service 34 Medicare Part B: Enrollment and Premiums Individuals who purchase Medigap must pay a monthly premium, which is set by, and paid to, the insurance company sellingsel ing the policy. There are 10 standardized Medigap plans with varying levels of coverage. Two of the 10 standardized plans cover Parts A and B deductibles and coinsurance in full (i.e., offer first-dollar coverage). In 2017, 61% of all 2018, 58% of al beneficiaries who purchased Medigap insurance were covered by one of these two plans.¹⁷²

164 Some are concerned that beneficiaries enrolled in Medigap plans with low cost-sharing requirements may have less incentive to consider the cost of health care services and may thus increase costs to the Medicare program. To address this, Section 401 of MACRA prohibits the sale of Medigap policies that cover Part B deductibles to newly eligible Medicare beneficiaries beginning in 2020.165 Some have also proposed imposing a Part B premium surcharge for Medicare beneficiaries who purchase certain types of Medigap plans. For example, the President'President’s FY2016 budget proposal¹⁷³proposal166 suggested imposing a Part B premium surcharge of approximately 15% of the average Medigap premium (about 30% of the Part B premium) for new Medicare beneficiaries who enroll in a near first-dollar Medigap plan.

Limit Federal Subsidies

Finally Final y, other proposals, such as that put forth in the FY2019 House Budget Resolution,¹⁷⁴167 would place limits on the amount of the federal subsidy for Medicare, and premiums would vary depending on the Medicare plan in which the beneficiary enrolled. In general, such premium support proposals would limit federal spending by changing the current Medicare program from a defined-benefit to a defined-contribution system.¹⁷⁵168 Most such proposals would limit the growth in the annual federal premium subsidy. Depending on how such a proposal is designed, and should Medicare costs grow more quickly than the limit, beneficiary premiums could increase more rapidly than the amount of the premium subsidy.

Considerations

Considerations Some of the issues that would need to be addressed when evaluating these types of deficit reduction proposals include (1) the ability of Medicare beneficiaries to absorb increased costs given their current levels of income and assets, as well wel as their other out-of-pocket expenditures (both health and non-health related); (2) the willingnesswil ingness of high-income beneficiaries to continue participating in Medicare Part B should their premiums be increased; and (3) the capacity of the Medicaid program to continue providing premium assistance to low -income beneficiaries should premiums increase.

Appendix A. 164 America’s Health Insurance Plans (AHIP), State of Medigap 2020, Trends in Enrollments and Demographics, July 7, 2020, p. 8, Medigap Plans C and F. 165 For additional information, including the potential budgetary impact of further limiting Medigap coverage of beneficiary out -of-pocket costs, see CBO, Options for Reducing the Deficit: 2021 to 2030 , “ Change the Cost -Sharing Rules for Medicare and Restrict Medigap Insurance,” December 9, 2020 , at https://www.cbo.gov/budget-options/56830. 166 See CRS Report R43934, President’s FY2016 Budget: Centers for Medicare & Medicaid Services (CMS) Legislative Proposals. Subsequent Presidents’ budgets did not contain this proposal. 167 T he proposed FY2019 House Budget Resolution may be found at https://www.congress.gov/bill/115th-congress/house-concurrent -resolution/128. The resolution was passed by the House Budget Committee on June 21 , 2018. See CRS Report R43479, Overview of Health Care Changes in the FY2015 House Budget, for discussion of a similar proposal. 168 Most premium support models combine Parts A and B benefits; the premium subsidy and beneficiary premiums would apply to both of these parts of Medicare. Congressional Research Service 35 link to page 42 Medicare Part B: Enrollment and Premiums Appendix A. History of the Part B Premium Statutory Policy and Legislative Authority

The basis for determining the Part B premium amount has changed several times since the inception of the Medicare program, reflecting different legislative views of what share beneficiaries should bear as expenditures have increased. When the Medicare program first went into effect in July 1966, the Part B monthly premium was set at a level to cover 50% of Part B program costs. Legislation enacted in 1972 limited the annual percentage increase in the premium to the same percentage by which Social Security benefits were adjusted for changes in the cost-of-living adjustments (i.e., COLAs). Under this formula, revenues from premiums soon dropped from 50% to below 25% of program costs because Part B program costs increased much faster than inflation as measured by the Consumer Price Index on which the Social Security COLA is based (seesee Table A-1).

From the early 1980s, Congress regularly voted to set Part B premiums at a level to cover 25% of program costs, in effect overriding the COLA limitation. The 25% provisions first became effective January 1, 1984, with general revenues covering the remaining 75% of Part B program costs. Premiums increased in 1989 as a result of the Medicare Catastrophic Coverage Act of 1988 ((P.L. 100-360), which added a catastrophic coverage premium to the Part B premium. The act was repealed in November 1989, and the Part B premium for 1990 fell fel as a result.

Congress returned to the general approach of having premiums cover 25% of program costs in the Omnibus Budget Reconciliation Act of 1990 (OBRA 90; P.L. 101-508). However, OBRA 90 set specific dollar figures, rather than a percentage, in law for Part B premiums for the years 1991-1995. These dollar figures reflected Congressional Budget Office estimates of what 25% of program costs would be over the five-year period. However, program costs grew more slowly than anticipated, in part due to subsequent legislative changes. As a result, the 1995 premium of $46.10 actuallyactual y represented 31.5% of Medicare Part B program costs.

The Omnibus Budget Reconciliation Act of 1993 (OBRA 93; P.L. 103-66) extended the policy of setting the Part B premium at a level to cover 25% of program costs for the years 1996-1998. As was the case prior to 1991, a percentage rather than a fixed dollar figure was used, which meant that the 1996 premium ($42.50) and the 1997 premium ($43.80) were lower than the 1995 premium ($46.10). The Balanced Budget Act of 1997 (BBA 97; P.L. 105-33) permanently set the premium at 25% of program costs so that, generallygeneral y speaking, premiums rise or fall fal with Part B program costs.¹⁷⁶

169 The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA; P.L. 108-173173), as modified by the Deficit Reduction Act of 2005 (DRA; P.L. 109-171), required that beginning in 2007, higher-income beneficiaries pay higher Part B premiums.¹⁷⁷ The income thresholds used to determine eligibility 170 The income 169 T he Balanced Budget Act of 1997 (BBA 97; P.L. 105-33) made a change that had the effect of increasing the Part B premium over time. Prior to BBA 97, both Parts A and B of Medicare covered home health services. Payments were made under Part A, except for those few persons who had no Part A coverage. T o extend the solvency of the Part A (Hospital Insurance) T rust Fund, BBA 97 gradually transferred coverage of some home health visits from Part A to Part B. Beginning January 1, 2003, Part A covers only post -institutional home health services for up to 100 visits, except for those persons with Part A coverage only who are covered without regard to the post -institutional limitation. Part B covers other home health services. 170 T he Medicare Prescription Drug, Improvement, and Modernization Act of 2003 ( MMA; P.L. 108-173) increased the Part B premium percentage for high-income enrollees; the Deficit Reduction Act of 2005 (DRA; P.L. 109-171) accelerated the phase-in period for such premiums. Congressional Research Service 36 link to page 25 link to page 49 Medicare Part B: Enrollment and Premiums thresholds used to determine eligibility for the high-income premium are to be adjusted each year by the growth in the Consumer Price Index.¹⁷⁸171 The Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended, Section 3402), however, froze these thresholds for the period of 2011 through 2019 at the 2010 levels. In 2020, the thresholds were to return to the levels they would have been had they been adjusted for inflation each year during the freeze and again indexed to inflation each year. As this would have resulted in higher income thresholds, it would have had the effect of reducing the number of beneficiaries who paypaid the high-income premiums in 2020.

Section 402 of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA; P.L. 114-10) maintains10) maintained the freeze on the income thresholds for all al income categories through 2017 and on the lower two high-income premium tiers through 2019. Beginning in 2018, MACRA reduces the threshold levels for the two highest income tiers so that more beneficiaries will fall wil fal into the higher percentage categories. (See " “Legislative Changes to Income Thresholds.") Additionally”) Additional y, starting in 2020, the income thresholds for all al income categories will be adjusted annuallyare adjusted annual y for inflation based on the 2019 income thresholds. This willwil , in effect, maintain the proportion of beneficiaries who pay the high-income premium.

Due to a 0% Social Security COLA coupled with an increase in Medicare premiums, a large percentage of Medicare Part B enrollees were protected by the hold-harmless provision in 2016 and continued to pay the 2015 premium of $104.90 per month. The Medicare trustees estimated that the standard premiums of those not held harmless in 2016 would therefore need to be increased to approximately $159 per month for aggregate premiums to still stil cover 25% of per capita benefit costs. The Bipartisan Budget Act of 2015 (BBA 15; P.L. 114-74), however, mitigated this sharp premium increase and required that the 2016 Part B standard premium be calculated as if the hold-harmless rule were not in effect and the increased costs had been spread across all al beneficiaries. (SeeSee Appendix D.) Instead of having those not held harmless bear the increase for all al of the Part B enrollee population, the act allowedal owed for the transfer of additional general revenues to the SMI Trust Fund to make up for the shortfall shortfal in premium revenue. As a result of this change, Part B enrollees not held harmless paid a standard monthly premium of $121.80 in 2016. To offset the increased costs, a $3.00 surcharge was added to the monthly premium in 2016 (the $121.80 premium amount included this surcharge), and will wil continue to be applied in subsequent years until the additional federal cost of about $9 billionbil ion is fully offset (the surcharge increases on a sliding scale for those who pay high-income premiums, up to $9.60).

BBA BBA 15 provided for similar premium adjustments in 2017 if there were a 0% Social Security COLA again in that year. However, as there was a 0.3% 2017 Social Security COLA, this provision was not applicable in 2017.

Section 53114 of the Bipartisan Budget Act of 2018 (BBA 18; P.L. 115-123) added an additional high-income category beginning in 2019 for individuals with annual incomes of $500,000 or more or couples filing jointly with incomes of $750,000 or more. Enrollees with income equal to or exceeding these thresholds pay premiums that cover 85% of the average per capita cost of Part B benefits instead of 80%. The threshold for couples filing jointly in this new income tier is calculated as 150% of the individual income level rather than 200% as in the other income tiers. The BBA 15 premium surcharge for this category is $10.20. This new top income threshold will wil be frozen through 2027 and will wil be adjusted annuallyannual y for inflation starting in 2028 based on the CPI-U. 171 Social Security Act §1839(i)(5). Congressional Research Service 37 Medicare Part B: Enrollment and Premiums Due to potential impacts of the COVID-19 pandemic on Part B spending, Section 2401 of the Continuing Appropriations Act, 2021, and Other Extensions Act limited the growth in the Part B premium for 2021 (see “Premium Calculation for 2021”). Specifical y, the act required that the 2021 monthly actuarial rate for enrollees aged 65 and older be determined as the sum of the 2020 monthly actuarial rate for enrollees aged 65 and older and one-fourth of the difference between the 2020 monthly actuarial rate and the preliminary 2021 monthly actuarial rate (as determined by the Secretary of HHS) for such enrollees. The monthly actuarial rate for 2021 was thus calculated as follows: $283.20 (the actual actuarial rate for 2020) + (0.25 x ($314.30 (the unadjusted monthly actuarial rate for 2021) - $283.20)) = $291.00 (rounded to the nearest dime). Table A-1. Monthly Part B Premiums, 1966-2020 Monthly Effective Year Premium Date Governing Policy; Legislative Authority 1966 $3.00 7/1966 Fixed dol ar amount; Social Security Amendments CPI-U.