Millions of Americans are eagerly awaiting to find out what their 2023 Social Security Cost of Living Adjustment (COLA) will be. However, even the most optimistic estimates of the size of the increase are probably not high enough to offset the actual higher costs experienced by seniors.
A key reason is that Social Security’s COLA calculation doesn’t include Medicare Part B premiums. And those premiums increased by 14.5% in 2022. But there’s potentially good news for retirees: Lower Medicare Part B premiums could be on the way.
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A biotech’s bad news is good news for Medicare Part B
You might be wondering how Medicare Part B premiums could possibly go down. After all, inflation is at its highest level in four decades. Almost everything you buy these days is more expensive.
To answer that question, we first need to understand why Medicare Part B premiums have increased so much in 2022. The Centers for Medicare and Medicaid Services (CMS) identified several reasons for the sharp increase in November 2021. was, however, that the Agency had anticipated potentially significant cost increases in connection biogenic‘s (BIIB 0.40%) Alzheimer’s drug Aduhelm.
Biogen received U.S. Food and Drug Administration (FDA) approval for Aduhelm in June 2021. The biotech company set an initial price for the drug at $56,000. An estimated 6.5 million Americans age 65 and older have Alzheimer’s disease. The higher cost for CMS to pay Aduhelm would have been huge.
However, the wheels fell off the cart for Aduhelm. In April 2022, CMS announced that it was effectively limiting coverage of the drug only to Medicare patients in authorized clinical trials. Less than a month later, Biogen scaled back its sales efforts for Aduhelm, nearly ditching it in the US
These developments pave the way for a major decision by US Department of Health and Human Services (HHS) Xavier Becerra. In a public statement, Becerra said that Medicare Part B premiums would be “adjusted downward” because previous projections of higher costs related to Aduhelm were no longer applicable.
The big question
Don’t pop the champagne corks just yet. One big question remains: will Medicare Part B premiums actually be lower in 2023 than they were in 2022, or will it just be a lower rate of increase than usual? We won’t find out the answer to this question until autumn.
Becerra said he originally hoped to reduce Medicare Part B premiums sooner after calculating the cost savings from not paying Aduhelm. However, CMS determined that this was not a viable option. Instead, it decided to pass on the savings in 2023 Part B premiums to Medicare beneficiaries.
It’s entirely possible that next year’s Medicare Part B premiums could be lower than they are now. Perhaps the Aduhelm-related savings will more than offset any other factors contributing to higher premiums.
There’s also a chance that Medicare Part B premiums will remain at current levels. CMS has not increased Part B premiums in four of the last 20 years.
However, the safest bet at this point is probably that the Medicare Part B premium increase for 2023 will be relatively modest. But it will undoubtedly be well below what would have been had CMS decided to cover Aduhelm in full. That’s still good news for retirees.