by Parnell Diggs
From the Editor: Every December we publish the Social Security figures that have been announced for the coming year. Here is the 2016 information as prepared by Parnell Diggs, the newly appointed director of government affairs for the National Federation of the Blind:
Typically the New Year brings with it a much anticipated series of annual adjustments in the Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI), and Medicare programs. But 65 million beneficiaries will be disappointed to learn that, when this new year arrives, there will be no cost-of-living adjustment (COLA), which means that SSDI and SSI payments will not change in 2016.
The 2016 numbers appear below, and, while benefit amounts will not change, there are some changes in other aspects of the Social Security and Medicare programs (which are not linked to the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers)) that beneficiaries (as well as future beneficiaries) should understand. There is also a word about the recently adopted ABLE Act, which will affect SSI resource limits. Let’s get started.
FICA and Self-Employment Tax Rates: If you have a job, you know that you do not bring home everything you earn; 7.65 percent of your pay is deducted to cover your contribution to the Old Age, Survivors, and Disability Insurance (OASDI) Trust Fund and the Medicare Hospital Insurance (HI) Trust Fund. Specifically, 6.20 percent covers OASDI, and 1.45 percent is contributed to the HI Trust Fund. Additionally, your employer is required to match this 7.65 percent for a total of 15.30 percent.
For those who are self-employed, there is no one to match the 7.65 percent. Thus, a self-employed individual pays the entire 15.30 percent of her income. These numbers will not change in 2016 whether an individual is employed or self-employed. As of January 2013, individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly) pay an additional 0.9 percent in Medicare taxes, not including the above amounts.
For the OASDI Trust Fund there is a ceiling on taxable earnings, which was $118,500 per year in 2015 and will remain unchanged in 2016. Thus, for earnings above $118,500, there is no 6.20 percent deducted for OASDI. As for Medicare, there is no limit on taxable earnings for the HI Trust Fund.
Think of it this way: The OASDI Trust Fund works like an insurance policy. You have to pay a premium to participate. Therefore, to qualify for Retirement, Survivors, or Disability Insurance benefits, an individual must pay a minimum amount of FICA taxes into the OASDI Trust Fund by earning a sufficient number of calendar quarters to become fully insured; in other words, one must work enough to be eligible for benefits.
In 2015, credit for one quarter of coverage was awarded for any individual who earned at least $1,220 during the year, which means that an individual would have needed to earn at least $4,880 to be credited with four-quarters of coverage. In 2016 the amount increases to $1,260 for one calendar quarter or $5,040 to earn four-quarters of coverage.
A maximum of four-quarters can be awarded for any calendar year, and it makes no difference when the income is earned during that year. Basically the taxes you pay into the OASDI and HI Trust Funds are your premiums to participate in the Social Security and Medicare programs.
The total number of quarters required to be eligible for benefits depends on the individual’s age. The older the individual, the more quarters are required. Furthermore, a higher average income during an individual’s lifetime means a higher Social Security or SSDI check when benefits start. Remember the above quoted numbers for quarters of coverage to become fully insured are only minimum amounts.
This concept is often misunderstood. The amount of earnings required to use a trial work month is based upon the national average wage index. In 2015 the TWP was only $780, and this amount increases to $810 in 2016. If you are self-employed, you can also use a trial work month if you work more than eighty hours in your business, and this limitation will not change unless expressly adjusted.
The earnings limit for a blind beneficiary in 2015 was $1,820 per month and will remain the same in 2016. Remember that this is not the TWP amount. This is to say that the TWP can be exhausted even if your income is well below $1,820 per month. See the above information about the TWP.
In 2016 a blind SSDI beneficiary who earns $1,821 or more in a month (before taxes but after subtracting unincurred business expenses for the self-employed, subsidized income for the employed, and impairment-related work expenses) will be deemed to have exceeded SGA and will likely no longer be eligible for benefits.
In January 2016 the average amount of SSDI benefits for a disabled worker is estimated to be $1,166. Pursuant to the Social Security Act, a cost-of-living adjustment occurs automatically when there is an increase in inflation as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). If there is no inflation, there is no automatic COLA for SSDI and SSI beneficiaries. The CPI-W indicated no inflation between the third quarter of 2014 and the third quarter of 2015. Thus, there is no COLA in 2016 and no increase in monthly benefit amounts.
The federal payment amount for individuals receiving SSI in 2015 was $733 and will remain the same in 2016. The federal payment amount of SSI received by couples will also remain the same at $1,100.
In 2015 the monthly amount was $1,780, and the annual amount was $7,180. These amounts will not change in 2016. The asset limits under the SSI program will also remain unchanged at $2,000 per individual and $3,000 per couple.
Signed on December 19, 2014, the ABLE (Achieving a Better Life Experience) Act will have a significant impact on resource limits associated with the SSI and Medicaid programs for those who were blind or disabled by the age of twenty-six. Traditionally SSI beneficiaries have been required to adhere to strict resource limits: such as a maximum of $2,000 in the bank for an individual receiving SSI benefits. Under the ABLE Act, however, the amount on deposit in an ABLE Account can be much higher.
ABLE Account contributions must be designated specifically for purposes such as education, housing (with a cautionary warning to follow), employment training and support, assistive technology, health, prevention and wellness, financial management, legal fees, funeral and burial expenses, and other purposes which may be set forth in the implementing regulations.
As to the warning about ABLE Account contributions for housing, it is important to note that SSI beneficiaries may still face the traditional $2,000 resource limit for ABLE Account funds designated for housing. Thus, SSI beneficiaries should consider the many other purposes not subject to the traditional resource limits when making ABLE Account contributions. Because there are also tax advantages associated with ABLE accounts, both SSDI and SSI beneficiaries are strongly advised to consult the financial institution of their choice about establishing an ABLE Account.
On November 10, 2015, the Department of Health and Human Services released updated information regarding deductibles, coinsurance amounts, and premiums for 2016. Since there is no COLA for 2016, the law contains a “hold harmless” provision that will protect more than 70 percent of beneficiaries from paying a higher premium. This provision is meant to protect beneficiaries from a reduction in net Social Security benefits that could occur when an increase in Medicare Part B premiums occurs without any change in benefits. Those not protected by the “hold harmless” provision include higher income beneficiaries subject to an income-adjusted Part B premium and beneficiaries who become entitled to Part B in 2016. Beneficiaries whose Medicare Part B premiums are paid by state medical assistance programs will see no change in their net benefits because the state will be required to pay any premium increases, should they occur. But for the relatively few beneficiaries who do not fall within the “hold harmless” provision, the Medicare Part B premium is increasing to $121.80 in 2016, as calculated in accordance with the Bipartisan Budget Act of 2015 signed by President Obama on November 2.
Medicare Deductibles and Coinsurance: Medicare Part A coverage provides hospital insurance to most Social Security beneficiaries. The coinsurance amount is the hospital charge to a Medicare beneficiary for any hospital stay. Medicare then pays the hospital charges above the beneficiary's coinsurance amount.
The Part A hospital inpatient deductible was $1,260 in 2015 and is increasing to $1,288 in 2016. The coinsurance charged for hospital services within a benefit period of no longer than sixty days was $0 in 2015. From the sixty-first day through the ninetieth day, the daily coinsurance amount was $315 per day in 2015 and will rise slightly to $322 in 2016. Each Medicare beneficiary has sixty lifetime reserve days that may be used after a ninety-day benefit period has ended. Once used, these reserve days are no longer available after any benefit period. The coinsurance amount paid during each reserve day used in 2015 was $630 and in 2016 will be $644.
Part A of Medicare pays all covered charges for services in a skilled nursing facility for the first twenty days following a three-day in-hospital stay within a benefit period. From the twenty-first day through the one hundredth day in a benefit period, the Part A daily coinsurance amount for services received in a skilled nursing facility was $157.50 for 2015 and is rising just slightly to $161 in 2016.
Most Social Security beneficiaries have no monthly premium charge for Medicare Part A coverage. Those who become ineligible for SSDI can continue to receive Medicare Part A coverage premium-free for at least ninety-three months after the end of a trial work period. After that time the individual may purchase Part A coverage. The premium rate for this coverage during 2015 was $407 monthly and will increase to $411 in 2016.
The annual deductible amount for Medicare Part B (medical insurance) in 2015 was $147 and will rise to $166 in 2016. The Medicare Part B monthly premium rate for 2015 was $104.90 per month and will not change in 2016 for those protected by the “hold harmless” provision since there was no COLA increase as discussed above. For those receiving Social Security benefits, this premium payment is deducted from your monthly benefit check. Individuals who remain eligible for Medicare but are not receiving Social Security benefits due to work activity must directly pay the Part B premium quarterly—one payment every three months. Like the Part A premiums mentioned above, Part B is also available for at least ninety-three months following the trial work period, assuming an individual wishes to have it and, when not receiving SSDI, continues to make quarterly premium payments.
Programs That Help with Medicare Deductibles and Premiums: Low-income Medicare beneficiaries may qualify for assistance through four Medicare Savings Programs. We will discuss three of them here and leave the fourth one alone because (to qualify for it each year) you must already be on it, and you know who you are. We begin with the Qualified Medicare Beneficiary program (QMB) and the Specified Low-Income Medicare Beneficiary program (SLMB). To qualify for the QMB program in 2015, an individual’s monthly income could not exceed $981, and a married couple’s monthly income could not exceed $1,328. To qualify for the SLMB program in 2015, an individual’s monthly income could not exceed $1,197 and a married couple’s monthly income could not exceed $1,613.
Under the QMB program, states are required to pay the Medicare Part A (Hospital Insurance) and Part B (Medical Insurance) premiums, deductibles, and coinsurance expenses for Medicare beneficiaries who meet the program's income and resource requirements. Under the SLMB program states pay only the full Medicare Part B monthly premium. Eligibility for the SLMB program may be retroactive for up to three calendar months.
Both the QMB and SLMB programs are administered by the Centers for Medicare and Medicaid Services in conjunction with the states. The rules vary from state to state, but the following can be said: As of 2015 resources (such as bank accounts or stocks) could not exceed $7,280 for one person or $10,930 per couple. The third program, known as the Qualified Disabled and Working Individuals (QDWI) Program, pays Part A premiums only and has resource limits of $4,000 for one person and $6,000 for a married couple. As to these programs, resources are generally things you own. However, not everything is counted. Examples of things that don’t count include the house you live in, one car, a burial plot (or $1,500 put aside for burial expenses), and furniture.
If you qualify for assistance under the QMB program, you will not have to pay the following: Medicare's hospital deductible amount, the daily coinsurance charges for extended hospital and skilled nursing facility stays; the Medicare Part B (Medical Insurance) premium, the annual Part B deductible; and the coinsurance for services covered by Medicare Part B, depending on which doctor you go to (these services include doctor services, outpatient therapy, and durable medical equipment).
If you qualify for assistance under the SLMB program, you will be responsible for the payment of all of the items listed above except for the monthly Part B premium, depending on your circumstances.
If you think you qualify but you have not filed for Medicare Part A, contact Social Security to find out if you need to file an application. Further information about filing for Medicare is available from your local Social Security office or Social Security's toll-free number (800) 772-1213.
Remember that only your state can decide if you are eligible for help from the QMB or SLMB program and also that the income and resource levels listed here are general guidelines, with some states choosing greater amounts. Therefore, if you are elderly or disabled, have low income and very limited assets, and are a Medicare beneficiary, contact your state or local Medicaid office (referred to in some states as the Public Aid Office or the Public Assistance Office) to apply. For more information about either program, call the Centers for Medicare and Medicaid Services (CMS) on its toll-free number (800) 633-4227, or visit <Medicare.gov>.