Monday, September 11, 2006
Medicare
Higher-Income Medicare Beneficiaries To Pay Higher
Part B Premiums Next Year
Higher-income Medicare beneficiaries in
2007 will be required for the first time to pay higher Part B premiums, a
change that is projected to increase federal revenue by about $20.8
billion from 2007 to 2016, McClatchy/Sacramento Bee reports (Pugh,
McClatchy/Sacramento Bee, 9/11). The means testing, which
will be phased in over three years, will affect about 1.2 million
beneficiaries in 2007 and 2.8 million by 2013, according to the Congressional Budget Office
(Moss, Dallas Morning News, 9/11). The premium
increases were established under a "little-noticed provision" of the 2003
Medicare law, the New York Times reports. The provision calls
for beneficiaries with higher incomes to pay an income-based surcharge on
the standard Part B monthly premium, which Medicare officials estimated
will be $98.40 for 2007. Individual beneficiaries with adjusted gross
annual incomes of $80,000 to $100,000 will pay a surcharge of 13.3%, or
about $13 per month, for a total monthly premium of about $111.50,
according to the Times. For individual beneficiaries with
adjusted gross annual incomes of more than $200,000, the surcharge will be
73.3%, or about $72 per month, for a total monthly premium of about
$170.50. By January 2009, higher-income beneficiaries will be paying 1.4
to 3.2 times the standard Part B premium, depending on their incomes.
According to the Times, "If the basic premium rises 10% a
year -- a relatively conservative forecast -- the most affluent
beneficiaries will be paying premiums of more than $375 a month in 2009."
The standard premium has increased an average of 12% since 2001.
Currently, Medicare beneficiaries pay Part B premiums covering about 25%
of their health care costs, with general tax revenues covering the
remaining 75% (Pear, New York Times, 9/11). By 2009,
higher-income beneficiaries will be paying premiums covering 35% to 80% of
their health care costs (Dallas Morning News, 9/11). Medicare
will explain the changes in the 2007 "Medicare and You" handbook, which
will be mailed in October, and the Social Security Administration will send a reminder letter
to beneficiaries in November (McClatchy/Sacramento Bee,
9/11).
Lawmaker Comments
The Times reports that the
charge is supported by "[f]iscally conservative Republicans" as well as
"some Democrats" who see it as a "progressive way to finance Medicare
without cutting benefits or raising payroll taxes." Sen. Dianne Feinstein
(D-Calif.) asserted that "high-income beneficiaries can afford to pay a
larger share of Medicare's costs," in part because they have received tax
cuts in recent years. However Rep. Nita Lowey (D-N.Y.) recently introduced
a bill to repeal the higher premium fees, saying that they will impact
"more and more middle-class seniors" (New York Times, 9/11).
Lowey's bill has stalled in a House committee (McClatchy/Sacramento
Bee, 9/11).
Inflation Adjustments
The 2003 Medicare law also calls for
the income brackets affected by the means testing to be adjusted for
inflation in future years (New York Times, 9/11). President
Bush in his 2007 budget proposal calls for elimination of the
inflation-based adjustments, a change that would increase the number of
beneficiaries paying the means-tested premium to about 8% of all
beneficiaries by 2016, according to outgoing CMS
Administrator Mark McClellan (McClatchy/Sacramento Bee,
9/11). Bush said, "This change gives beneficiaries increased participation
in their health care" (New York Times, 9/11).
Concerns
According to McClatchy/Bee, the change
has "enraged many because it was adopted without public debate." It was
not contained in either the House or Senate version of the Medicare bill
but was added by a "Republican-led conference committee,"
McClatchy/Bee reports. Advocacy groups including AARP, the Medicare Rights
Center and the Senior
Citizens League oppose the change. According to
McClatchy/Bee, critics "say high-income beneficiaries paid
more into Medicare during their working lives and shouldn't have to pay
more now." The advocacy groups also are concerned that the prospect of
paying higher premiums will discourage seniors from seeking employment. In
addition, some groups "worry that the new premiums could lead healthier,
wealthier seniors to depart the Part B program, leading to higher costs
for those who remain," McClatchy/Bee reports. Shannon Benton,
executive director of the Senior Citizens League, said, "With fewer people
in it, the price has to go up to sustain the system. Our fear is it will
increase premiums for even the lower-income people." David Certner,
legislative policy director at AARP, said, "Continually shifting the cost
onto the people is not the answer. We need to figure out why we're
spending so much more as a nation on health care and our health outcomes
are no better than average" (McClatchy/Sacramento Bee, 9/11).
Additional Comments
According to the Times, the
income-based premiums mark "a major departure from the traditional
arrangement" in which beneficiaries of all income levels generally paid
the same Part B premium (New York Times, 9/11). McClellan
said, "We don't want people to pay a large share of their income for their
Medicare benefits, but we also want to make sure these benefits are
available for everyone for many years to come" (McClatchy/Sacramento
Bee, 9/11). Pauline Rosenau, a professor of public health at the University of Texas Health
Science Center, said, "It's a modest change from a financial
perspective, but it represents a huge step philosophically" (Dallas
Morning News, 9/11). Theodore Marmor, a professor of political
science at Yale University,
said, "The new income-related premium is fundamentally at odds with the
premises of social insurance." He added, "Large numbers of upper-income
people will eventually want to find alternatives to Part B of Medicare and
will no longer be in the same pool with other people who are 65 and older
or disabled. Congress will then have less reluctance to cut the program"
(New York Times, 9/11). Maria Freese, director of government
relations and policy for the National Committee to Preserve Social Security and
Medicare, said, "I doubt anyone will cry for the wealthy, but this
opens the door for more severe means testing," adding that she is
concerned that Congress in the future could lower the income threshold to
include middle-income beneficiaries. Freese said that if many
beneficiaries drop Part B coverage, "Medicare will become a welfare
program with increasingly unsustainable costs." Robert Moffit, director of
the Center for Health Policy Studies at the Heritage
Foundation, said, "With rapidly increasing health care costs and an aging
population that's going to double, we can't afford to treat the
millionaire senior in Boca Raton, Fla., the same way we do the retired bus
driver" (Dallas Morning News, 9/11).