Health Care & General Inflation
How is Health Care Inflation (entered on home tab) handled in PRC? I assume Heath Care inflation is General Inflation (also entered on home tab) PLUS Health Care Inflation and that % is added to health care costs on Expenses tab / Healthcare for each successive year. Is the healthcare inflation also added to Medicare premiums going forward?
The health care inflation you enter will be added to the general inflation and used for your health care costs. The whole healthcare thing is kind of up in the air right now with the possibility in the new legislation of dropping the Medicare age to 60. But, if you're retired between 60 and 64 and getting health care from ACA, it should be inexpensive as is Medicare, so not a huge difference, I wouldn't think.
Investment Advisor/Financial Counselor/Retirement Planner
Emancipare Investment Advisors LLC
Hi Pizza Man,
I had to look at the code to answer your question. Medicare premiums are strictly adjusted according to the general inflation rate. In retrospect, though, I'm wondering whether that's correct in light of the fact that the tool provides an alternate mechanism for healthcare inflation. What do you think? I'm definitely not inclined to make any changes in the 2021 model but want to make it right in the 2022 model.
Its not clear to me how Medicare premiums are adjusted year to year. It doesn't appear to be just related to inflation, however you determine that. I found these two links:
Like the COLA, the 2021 Part B premium will be announced in October after the Centers for Medicare & Medicaid Studies (CMS) makes adjustments based off the CPI-W and other data gathered from BLS. https://www.wemakemedicareeasy.us/blog/largest-cola-increase-in-a-decade-for-part-b-projected-for-2022.aspx
The Medicare-and-COLA math underscores the broad challenge retirees face in protecting themselves against inflation. Social Security is the only retirement benefit that provides any type of built-in inflation protection - one of the key reasons that the program is so valuable.
Still, rising healthcare costs pose a broader threat for retirees. Medicare’s trustees are forecasting annual Part B premium increases averaging 5.9% through 2028 - well ahead of general inflation.
Advocates for Social Security expansion hope to address the widening gap between healthcare and general inflation by adopting a COLA formula called the CPI-E (for elderly). This is an experimental index maintained by the U.S. Bureau of Labor Statistics that more accurately reflects the inflationary forces impacting seniors, such as healthcare. It has risen slightly more quickly than the CPI-W over the past decade - so it would help, but only a bit. https://www.reuters.com/article/us-column-miller-medicare-idUSKBN1XM2C1
Looked into Medicare a little more: The Center for Medicare & Medicaid Services (CMS) administers Medicare & Medicaid. For the National Health Care Dollars for FY 2020, 23% is Medicare, 18% is Medicaid (total for the two 41%), Private Insurance 36%, Out of pocket 11%, others 12%. https://www.cms.gov/files/document/cms-financial-report-fiscal-year-2020.pdf. Where the annual increase in Medicare premiums comes from still looks like a black box to me, but Table 1 - National Health Expenditures and Selected Economic Indicators, Levels and Annual Percent Change: Calendar Years 2012-2028 https://www.cms.gov/files/zip/nhe-projections-2019-2028-tables.zip-0 apparently shows what CMS looks at to determine premium changes. The forecast of annual Part B premium increases averaging 5.9% through 2028 in my last post apparently comes from this table. This percent increase in not related to general inflation. So, since there are predictions on the future of Part B premiums, adding a specific inflation input into PRC for Part B premiums above general inflation may be a good idea. A separate input for inflation for non-medicare costs??????????????????????