Higher-Income Beneficiaries Face Medicare Payment Changes
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).
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).
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).
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).
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, Florida, the same way we do the retired bus driver" (Dallas Morning News, 9/11).