A Medicare Advantage premium giveback, often termed as a Social Security Medicare premium refund, is when some Medicare Advantage plans return a part of the funds that would typically be allocated for Medicare Part B premiums. For many, their Medicare premiums are deducted straight from their Social Security benefits.
As a result, a premium giveback means retaining more of those benefits since a lesser amount is spent on Part B. However, only a limited number of Medicare Advantage (MA) plans extend this refund benefit. You might have noticed advertisements about MA plans that promise to “boost your Social Security payment each month.” It’s crucial to understand that while some plans might return a portion of your premiums, it doesn’t necessarily make them the optimal choice for everyone.
What exactly is a Social Security Medicare Premium refund?
If you opt for a private Medicare Advantage plan over the traditional Medicare, the Medicare Part B premium, set at $164.90 for the majority in 2023, is usually obligatory. There could also be an extra monthly charge for the selected plan. In 2023, KFF (previously Kaiser Family Foundation) reports that 73% of members in standalone Medicare Advantage plans with prescription drug benefits didn’t have any premiums other than the Part B one. A few of these plans also give back some of the Part B premiums to their subscribers.
KFF notes that about 16% of Medicare Advantage plans provide these premium returns. Within this, 10% of standard MA plan members and 7% of those in Special Needs Plans (designed for those with chronic conditions or dual enrolment in Medicare and Medicaid) receive this benefit.
The refund amounts can range, from as little as under $10 to over $100 monthly, as highlighted by Jeannie Fuglesten Biniek, who is an associate director focusing on Medicare policy at KFF.
For those who have their Medicare premiums drawn from Social Security, this refund is added to their benefits, increasing their monthly Social Security amount. If your premiums are paid directly to Medicare and you haven’t accessed your Social Security yet, you’ll be charged a lesser Part B fee each month.
Even though only a minority of plans offer these refunds, they are heavily advertised. KFF’s research on Medicare Advantage plan promotions showed that two-thirds of these ads by intermediaries spotlighted the potential to receive a refund in their Social Security payment.
How do MA plans manage these refunds?
Medicare Advantage plans that provide these premium refunds can do so due to rebates from the Centers for Medicare & Medicaid Services (CMS). When a plan’s anticipated expenses for offering Part A and Part B services fall below the maximum CMS is willing to pay in a particular county, CMS rebates a segment of that surplus to the plan, as explained by Fuglesten Biniek.
The average rebate for these plans stood at $2,352 annually for each member in 2023, as stated by the Medicare Payment Advisory Commission (MedPAC). These premium reductions are one of three methods Medicare Advantage plans can utilize the rebate.
Fuglesten Biniek clarifies, “The returned amount should be allocated to either lower out-of-pocket costs, offer additional services like dental or vision care, or provide a reduction against Part B and/or Part D premiums.” Predominantly, Medicare Advantage plans use most of their rebate to lessen out-of-pocket expenses or offer added coverage like dental or hearing services, instead of lowering the premiums.