For the first time in Medicare's history, millions of seniors will be required to pay substantially more for their Medicare Part B premiums than other seniors next year. In 2007 the government will begin "income relating," or means testing. Higher income seniors will have to pay more for their doctors' services and outpatient coverage. The change, which comes as part of the 2003 Medicare drug legislation, could affect as many as 2.3 million seniors according to estimates by the Congressional Budget Office (CBO).
Sign TSCL's Petition Opposing Means Testing for Medicare Premiums!
Currently, the Medicare premium that beneficiaries pay ($88.50 per month) is 25% of the total cost. The government pays the other 75%, or $265.50, in 2006. This will change in 2007 when the government starts phasing in higher premiums for seniors with higher incomes, making them pay a higher portion of the total cost. Assuming the Medicare Part B premium continues to rise at the same average rate that it has for the past five years (about 13.4%), the following chart illustrates what estimated premiums may look like for 2007 through 2009.
Estimated Part B Premiums 2007 - 2009 As Means Testing Begins
Effective January 1, 2007, the government will start determining the Medicare Part B premium based on a person’s income. Assuming that the base Medicare premium continues to grow at the same pace that it has since 2002 (about 11.6% per year) here’s what premiums will be for 2007, and what they may look like for 2008 and 2009 as the government begins “income relating” or Means Testing.
Estimated Part B Premiums Under Means Testing
Income:
Individuals |
Income:
Filing jointly |
Monthly premium
in 2006 |
Monthly premium
in 2007* |
Monthly premium
in 2008** |
Monthly premiu
in 2009** |
| Under $80,000 |
Under $160,000 |
$88.50 |
$93.50** |
$104.30 |
$116.50 |
| $80,000 - $100,00 |
$160,000 - $200,000 |
$88.50 |
$106.00 |
$132.20 |
$163.00 |
| $100,000 - $150,000 |
$200,000 - $300,000 |
$88.50 |
$124.70 |
$173.90 |
$232.90 |
| $150,000 - $200,000 |
$300,000 - $400,000 |
$88.50 |
$143.40 |
$215.60 |
$302.80 |
| Above $200,000 |
Above $400,000 |
$88.50 |
$162.10 |
$271.82 |
$372.60 |
Source: *Medicare Premiums and Deductibles for 2007, Centers for Medicare and Medicaid Services, September 12, 2006.
** Estimates assume annual rate of increase of 11.6%, the average since 2002 (past five years)
Means testing of the Part B premium was one of the most controversial elements of the 2003 Medicare drug law. Neither version of the law originally passed by the House or the Senate even contained the provision. The Washington Post reported in 2003 that the House version of the legislation would have required Medicare beneficiaries to pay more for medicine under the new Part D drug plans. The provision to charge higher income beneficiaries more for the Part B premium rather than for prescription drug coverage was inserted at the last minute by the small handful of Congressional leaders who negotiated the final version of the law behind tightly closed doors.
Means testing radically changes the nature of Medicare. The program was designed as universal social insurance with everyone paying a uniform premium and receiving a standard package of benefits. Supporters of means testing argue that it's needed to cut Medicare costs and make the program more sustainable. Government estimates, however, indicate that higher premiums for some will not save Medicare.
Sign TSCL's Petition Opposing Means Testing for Medicare Premiums!
According to CBO estimates, means testing the Part B premium would only save about $13 billion over ten years. That's less than three tenths of one percent of what Medicare is estimated to spend over the same period.
Although similar provisions surfaced in the past, they have proven politically explosive. The change was the main feature of the 1988 "Medicare Catastrophic" law to protect Medicare beneficiaries from catastrophic health care expenses. It proved so incendiary that Congress was promptly forced to repeal the law the very next year.
TSCL believes that means testing opens the door for Congress to shift an ever-growing portion of premium costs to seniors. Indeed, in his 2007 fiscal year budget, President Bush has proposed changes that would subject growing numbers of seniors to higher premiums. Congress could at any time change the income levels and/or the portion of the premium seniors have to pay. TSCL believes the 2003 Medicare drug law should be replaced and supports a simple, easy-to-use drug benefit.
Sources: "Graduated Premiums Are Being Considered For Medicare Program," David Rogers, The Wall Street Journal, October 28, 2003. "Means Test Deal Near on Medicare," Amy Goldstein, The Washington Post, October 16, 2003. CBO Estimate of Effect on Direct Spending and Revenues of Conference Agreement on H.R. 1, Congressional Budget Office, November 20, 2003. The Budget and Economic Outlook, An Update, CBO,August, 2005.
March 2006
