February 2022

In November 2021, the Center for Medicare and Medicaid Service (CMS) released the 2022 premium amounts. If you are currently on Medicare or approaching Medicare age, you most likely took notice. The CMS announced a 14.5% increase to Part B medical coverage. The new amount will be $170.10, up from $148.50 in 2021. This equates to the largest increase in Medicare history.

Several factors contributed to the significant increase:

1. During the pandemic, Congress elected to reduce the increase to the 2021 Medicare premiums. The increase in 2021 was only $3/month, well below the proper amount needed to fund Medicare. While this maneuver benefited many Americans in 2021, it only delayed the inevitable. The appropriate increase that should have occurred in 2021, was pushed out to future years. Part of the 2022 increase is a result of Congress delaying the 2021 premium increase to future years, which is now coming to realization.

2. Medicare has seen an increase in cost of healthcare and an increased in overall usage of the healthcare system. As you can imagine, the Covid-19 played a role in this and was not factored into previous years’ projections.

3. CMS is preparing for new drug that treats Alzheimer’s disease may hit the market in 2022. While CMS is still determining if the drug will be covered, it is building contingency funds in preparation. The drug, Adulhelm™, had an original estimated price of $56,000 per year when CMS decided on the 2022 Medicare part B premiums. The drug company for Adulhelm™ has since announced the annual cost will be closer to $26,000.

On Monday January 10, 2022, Health and Human Services Secretary Xavier Becerra asked CMS to re-consider the dramatic premium increase to Part B of Medicare. Given the new information about Adulhelm™ this request seems plausible. CMS is currently reviewing the request. In addition to the increased premiums for Medicare Part B, the income-adjusted surcharges have also undergone a steep increase.

The surcharge is assessed to individuals and families who exceed the income limits set by the CMS. The table below shows the income limits and the surcharges associated with crossing those limits. This puts even more importance on forward tax-planning. As Medicare premiums continue to rise, and they will, so does the associated Medicare surcharge penalties for having too much income show on your return.

Forward tax planning allows families to properly organize their assets in a structure that avoids Medicare surcharge penalties while providing the necessary cash flow.