2005 Changes to
Social Security & Medicare

By Jacques Chambers, CLU

Social Security and Medicare have announced changes in the benefits and payments for 2005. The annual Cost-of-Living Adjustment (COLA) is based on the Bureau of Labor Statistics’ Consumer Price Index for Urban Wage Earners and Clerical Workers ( CPI-W). Additionally, the impact of the Medicare Modernization Act of 2003 is affecting benefits offered under Medicare.

Social Security

Based on the CPI-W for the past year, Social Security benefits will be increased by 2.7% beginning January 1, 2005 . This means that the benefit for a disabled person collecting SSD will increase from an average benefit of $871 to $895 per month. Remember that January SSD benefits are paid in February.

The Cost-of-Living Adjustment also affects other amounts, such as the maximum annual salary subject to F.I. C .A. taxes ($90,000), earnings required for one work credit or quarter ($920), and exempt earnings for early retirees and earnings in the year of reaching full retirement age.

More important to persons already collecting under one of the disability programs are changes to the amount of wages that may affect SSD benefits. The monthly work earnings required to count as one month of Trial Work Period is raised from $580 to $590 per month. The Sub stan tial Gainful Activity (SGA) amount is bumped from $810 to $830 per month.

The SSI payment by the federal government also increases from $564 to $579 per month for an individual and from $846 to $869 per month for a couple. Note that many states pay a supplemental amount (SSP) to the federal payment. In those states your total benefit should increase by $15 and $23 respectively.

For Persons Collecting
both SSD and SSI

If you are collecting benefits under both SSD and SSI and your SSI stops because of the COLA increase in your SSD benefit, you will not lose your Medicaid coverage. Under a federal law called the Pickle Amendment (named for the Congressman from Florida , not the situation it puts you in), Medicaid eligibility continues if SSI benefits stop due to a COLA increase in SSD benefits. Since states administer Medicaid programs, you should check with your local Medicaid office to see if the Medicaid coverage continues automatically or if paperwork is required.

Medicare

The big news in Medicare is that the premium for Medicare Part B - Medical is having its highest increase ever. Part B premium will increase January 1, 2005 from $66.60 to $78.20 per month, an increase of $11.60 or 17.4%. This will effectively wipe out most of the COLA increase in benefits.

Medicaid as well as several buy-in programs administered by the Medicaid offices provides assi stan ce in paying Medicare premiums and copays.

Part B premiums are based on a formula set by law with the federal government paying about 75% of the Part B costs and the beneficiaries’ premium covering the remaining 25%. The increase is especially high this year because, in addition to increased expenditures under Part B, the recently enacted Medicare Modernization Act (MMA) of 2003 increased the payment to providers under Part B. Additionally, Medicare continues to expand its coverage of preventive benefits, see below.

Some people, over age 65, who did not accumulate enough quarters to obtain Medicare without a Part A cost, will see their Part A premium increase to $375 per month.

The Part A – Hospital coverage benefits are changed as well. The inpatient hospital deductible will increase from $876 to $912. The patient copays paid after the first 60 days in the hospital are increased along with the skilled nursing facility copays after 21 days.

The Medicare Part B annual deductible has remained at $100 for many years. Under MMA, that will now be tied to inflation as well. Beginning in 2005, the Part B deductible will increase to $110.

Medicare Benefit Changes

In addition to adjusting the numbers for inflation, MMA is expanding benefits provided by Medicare.

Medicare is again attempting to encourage beneficiaries to enroll in alternative HMOs and PPOs for their Medicare coverage. Renamed Medicare Advantage, payments to alternative plans will increase in an effort to give beneficiaries a greater choice in their coverage.

Preventive C are – In addition to the other preventive benefits covered under Medicare, the following additions will be effective 01-01-05 :

• Initial WellnessExam – A one-time initial wellness physical exam is covered for new enrollees in Medicare Part B. To be covered, the exam must be given in the first six months of Part B coverage.
• Blood test screening for the early detection of cardiovascular diseases.
• Diabetic screening tests for Medicare beneficiaries at risk of diabetes.

Drug Discount C ards – Discount cards offering discounts on medications of from 10 – 25% will remain available through 2005.

In addition, persons with income of less than $12,469 for a single person and $16,862 for a married couple may qualify for a $600 credit to help pay for prescriptions. Call 1-800-MEDICARE or go to www.medicare.org for more details on eligibility for the drug card credit.

Prescription Drug C overage – Enrollment will start on November 15, 2005 for coverage under the new Medicare Part D – Prescription Drugs.

Part D coverage will be voluntary and it is estimated that it will cost beneficiaries approximately $35 per month. The only eligibility requirement for Part D is that you have to be enrolled in either Part A or Part B of Medicare, or both.

Similar to Part B in its requirements, persons who do not enroll in Part D during the open enrollment period ( 11-15-05 to 05-15-06 ) will only be permitted to enroll in the coverage once a year. There will also be financial penalties for late enrollees similar to late enrollees in Part B.

Coverage under Part D will be provided by various private contractors, and each may offer different benefit schedules, provided they offer at least two medications in each therapeutic class. In addition, the benefits offered must “actuarially” equal or exceed the benefits in the Baseline Benefit Schedule.

BASELINE BENEFIT SCHEDULE

• Premium payments
• Payments by other plans
• Cost of non-formulary drugs

Since private insurance companies and administrators may offer different schedules, it is important to learn as much as possible about the various alternatives before enrolling in any plan.

For more information, go to:

• http://medicare.gov
• http://ssa.gov