Trustees Estimate 2007 COLA 2.3% - Medicare Premiums To Increase 11% - TSCL Calls For Slowing the Rise Of Part B Premiums

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Trustees Estimate 2007 COLA 2.3% - Medicare Premiums To Increase 11% - TSCL Calls For Slowing the Rise Of Part B Premiums

Medicare premiums will increase at least 11% in 2007 and are expected to far out-strip Social Security Cost-of-Living Adjustments (COLA). According to the most recent Social Security Trustee report, benefits will only rise by about 2.3% in 2007. In addition, for the first time next year, Medicare Part B premiums will be determined by income. Seniors with incomes below $80,000 will pay about $98.20 for their monthly Part B premium, an increase of $9.70 per month. But seniors with incomes over $80,000 will pay much higher “income related” or “means tested” premiums. Based on information from the 2006 Medicare Trustees Report, here are estimates of what premiums could look like over the next three years:

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)

Source: Estimates by Mary Johnson based on 2006 Medicare Trustees Report, May 1, 2006.

Few details are yet available on how the government will determine and collect the means tested premiums. The law requires that the Social Security Administration use information from tax returns. TSCL believes that higher Medicare premiums are a cut in benefits. Premiums are already escalating at double-digit rates. Since 2001 monthly premiums have increased from $50 to $88.50. Once means testing starts, TSCL believes that Congress may try to expand it. Income levels could be lowered to affect more seniors, or Congress could impose “income relating” for deductibles and other Medicare costs.

TSCL endorses “The Medicare Part B Premium Fairness Act,” introduced by Representative Nita Lowey (NY), that would repeal means testing. TSCL believes that more can be done to slow the rise of Part B premiums for the program as well as for beneficiaries, and is working with Members of Congress to support such measures.

Sources: “It’s Not About The Trustees,” The New York Times, April 6, 2006. 2006 Social Security & Medicare Trustees Reports, May 1, 2006.

July 2006