A new law signed by President Obama will help shield some 17 million Americans from steep premium hikes. But many will continue to see changes in the amounts they pay for Medicare next year.

About 30 percent of Medicare beneficiaries were facing a 52 percent increase in their Medicare Part B medical insurance premiums and deductible in 2016. But Congress and the Obama Administration worked out an agreement so beneficiaries will pay about $119 per month instead of $159.30 for Part B. The remaining 70 percent of Medicare beneficiaries will continue to pay the same premium in 2016 as they did in 2015, $104.90. The agreement was a part of the recently approved budget agreement that Congress passed and President Obama signed.

However, beneficiaries will also have to pay an extra $3 per month to help pay down a loan the government gave to Medicare to offset lost revenue. In addition, all Part B beneficiaries will see their annual deductible increase by 15%, or $19 dollars to about $166 in 2016, the first such increase since 2013.

The Part B monthly premium is a well-established Medicare yardstick paid by most of the program’s 55 million beneficiaries, who usually have the money deducted from their Social Security checks.

New beneficiaries will pay a larger amount, and upper-income retirees are looking at considerably higher charges, depending on their circumstances. Most people will continue to pay the $104.90 because a federal law protects Social Security recipients from higher Medicare premiums. Since there won't be a Social Security cost-of-living increase next year, their premiums will be unchanged.

The nearly 3 million new beneficiaries will pay $121.80 a month – about $38 a month less than was estimated before the budget deal. Wealthier retirees will pay more, ranging from $170.50 a month for individuals making more than $85,000 a year, to $389.80 for those making more than $214,000.

Credit for keeping the huge increase from going into effect goes, in part, to the president’s health care law, which has been gradually closing a coverage gap in the Medicare prescription drug benefit, easing pressure on many retirees. Another factor has been the historically low growth in the nation’s health care spending, which has meant stability for Medicare beneficiaries. Privately-insured working families have not had the same experience during the Obama years because employers have continued to keep passing on a bigger share of health care costs to their workers.

Medicare's Part B premium is set by law to cover 25 percent of the cost of outpatient care, with the government picking up the rest. Higher income beneficiaries pay more, since their premiums are set to cover a bigger percentage of costs. Hospital and nursing home care under Medicare is separately financed by a payroll tax equally divided between workers and employers.

Fewer Options for Low Income Seniors on Medicare Drug Plans

Many low-income seniors may be very surprised when they realize a federal subsidy they get won’t cover the full cost of their monthly drug plan premiums as it has in the past. The Medicare subsidy won’t stretch as far next year either because many people’s Medicare plans will cost more than the federal subsidy. More than two million older or disabled Americans will have to pay for the shortfall. As many seniors found out as they considered changing plans in the recently-finished Medicare enrollment period (which ended Dec 7), if your health plan doesn’t accept the subsidy as full premium payment, you’ll be responsible for the shortfall.

Some eight million people in traditional Medicare have drug plan subsidies, which Medicare also calls “extra help.” To qualify for the full subsidy, an individual must have an income below $17,655 in 2015 and less than $13,640 in assets.

Many seniors used to have premium-free drug plans. But overall, there’s been a 20 percent decrease in the number of Medicare drug plans whose coverage accepts the subsidy as full premium payment. Nationwide, there were only 227 such plans available, the lowest number since the drug benefit was added to Medicare in 2006, according to the Centers for Medicare & Medicaid Services.

There used to be a dozen or more premium-free plans in most states in the early years of the drug benefit program, according to Juliette Cubanski, associate director for the Program on Medicare policy at the Kaiser Family Foundation. But after insurance market consolidation and federal rules discouraging duplicative options, the number of drug plans overall has fallen. In 2016, 22 states offered six or fewer premium-free plans, according to a KFF study released recently, while Florida offered just three. The subsidy is recalculated every year using the average of premiums for standard drug plans in a particular region.

With the Medicare open enrollment period closed as of December 7, beginning January 1, most plan subscribers are locked into their plans for a year. But if you are in the subsidy plan, you still have the ability to switch because there’s an exception for subsidy beneficiaries. So if you are getting the low income premium subsidy, you can switch plans at any time. For more details on how to apply for the program, go to https://www.medicare.gov/your-medicare-costs/help-paying-costs/save-on-drug-costs/save-on-drug-costs.html.

More Budget Changes Affecting Seniors

In addition to the premium changes, several other significant changes are coming as a result of the new budget law – some for better, some for worse.

Right now, a married person – usually the higher wage-earner in a couple – who’s at least full retirement age could file for his or her own Social Security benefit and then immediately suspend those benefits while the spouse could file for spousal benefits. This allows the higher wage earner’s benefits to grow 8 percent per year. Meanwhile, the couple still can get a Social Security check and down the road, the surviving spouse could get a higher benefit.

But under the new budget law that option is ending for new filers starting May 1, 2016. So if you are interested in applying for this, now is the time to apply. People who use this strategy will be grandfathered in until age 70.

Another provision being phased out under the new budget law, involves what’s known as a “restricted application.” Right now, people eligible for both a spousal benefit based on their spouse’s work record and a retirement benefit based on his or her own work record, could choose to elect only a spousal benefit at full retirement, according to Social Security Timing, a financial planning firm that helps people determine optimal Social Security claiming strategies.

That would let them collect a higher benefit later on. Under the new law, however, only those born Jan. 1, 1954, or earlier can use this option. Anyone younger will just automatically get the larger of the two benefits, Social Security Timing reported.

The new law also fixes the Social Security Disability Trust Fund from running out of money. Before the law, millions of Americans faced an automatic 19 percent reduction in their disability benefits at the end of 2016. The new law fixes that by shifting payroll tax revenue from one Social Security Trust Fund – the Old-Age and Survivors Insurance Trust fund, to another, the Disability Insurance Trust Fund.

Quality over Fee for Service

The Obama Administration continues to work toward paying for quality of health care services versus its long standing way of paying for services, known as fee-for-services. The concept is to turn away from paying for a piecemeal approach to care, regardless of results. The new idea is to foster accountability among hospitals, doctors, nursing homes and home health agencies. It mirrors shifts occurring in employer-sponsored insurance and has support, in principle, from lawmakers of both parties.

As the Health and Human Services Department continues to push forward on rewarding quality in health care services, Medicare officials are considering a measure that would penalize doctors who order routine prostate-cancer screening tests for their patients.

The proposal, which was reported by the Wall Street Journal, and hasn’t been widely publicized, generated a last-minute flurry of comments to the Centers for Medicare and Medicaid Services, which is considering the idea. Most of those comments came in at the last few days of the consideration period and most were strongly against the proposal, the newspaper reported.

The idea is part of HHS’s push to develop ways to identify and reward value in health care. The Obama Administration has said it plans to tie 50 percent of Medicare payments to such quality measures by 2018.

Many of those commenting worried that the measure would discourage doctors from discussing the pros and cons of screening for prostate-specific antigen (PSA) with their patients and allowing them to decide, as several major medical groups recommend.

Since 2012, the U.S. Preventive Services Task Force has recommended against routine screening for prostate cancer for men of any age on the grounds that the benefits don’t outweigh the harms. Studies have shown that screening only slightly reduces the risk of death from prostate cancer, because most grow so slowly they effectively are harmless. Yet many men diagnosed with prostate cancer undergo surgery and radiation, which can have lifelong side effects.

Medicare is also changing the way reimbursement is done for knee and hip replacements as another effort to bring down costs and improve quality. Payments and rewards will now be tied to results of the surgical procedure for hip and knee replacements, starting April 1, 2015, as an experiment in 67 metropolitan areas. The aim is better coordination that starts with the surgery itself, and continues through recovery and rehabilitation.

Under the new system, hospitals can receive additional money by meeting certain targets for quality and overall costs. If they fall short, eventually, they will be financially liable. Medicare recipients will still be able to pick their doctors and hospitals for their surgeries.

Last year, about 400,000 Medicare patients had hip and knee replacements, ranging in cost from $16,500 to $33,000 across the U.S. Quality varied, with rates of complications more than three times higher for some hospitals than others. Researchers think the wide disparities are because of inefficiency and waste in the health care system, not just regional differences in the cost of doing business. Research has shown that patients usually do better with surgeons who perform a high number of hip and knee replacement surgeries.

Medicare had initially proposed the idea last summer but cut the number of metro areas from 75 to 67 and moved the start date back from Jan 1 2016, giving hospitals more time before they’re required to repay money for falling short of goals. Among the major metropolitan areas in the experiment are South Florida, the New York-New Jersey area and Southern California.

[ALSO CONTRIBUTING: Associated Press, Kaiser Health News, USA Today and the Wall Street Journal]

Alan Schlein runs DeadlineOnline.com, an internet training and consulting firm. He is the author of the bestselling “Find It Online” books.

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