President Bush recently called for the deepest Medicare cuts of his six years in office. Citing the need for "fiscal responsibility," he proposed more than $60 billion in Medicare reductions over five years. While some of the proposed savings would come from limits on reimbursements to health care providers, President Bush proposes $10 billion to come by expanding Means Testing of Medicare premiums.
The President would make Medicare beneficiaries with annual incomes that exceed $80,000 (individuals) or $160,000 (couples) pay higher Part D premiums for prescription drug benefits. They already started to pay higher Part B premiums for doctors' and outpatient services effective January of this year. Even more troubling is a second proposal to eliminate the annual indexing of the income thresholds. Doing so would mean more and more middle-income seniors would take a hit in future years.
Sign our Petition to Congress Opposing Means Testing for Medicare Premiums
We have a similar example of this today. Social Security benefits may be subject to tax if a beneficiary's income exceeds $25,000 or a married couple's income exceeds $32,000. When that tax was first signed into law in 1983 it was sold to the public on the basis that it only affected "high income" seniors." Yet these income levels are no longer considered high, but middle-income. Unlike income tax wage brackets that are adjusted upward annually to account for the normal growth of incomes, the income levels that subject Social Security to taxation have never been adjusted. According to an analysis by Advisor editor Mary Johnson, had these income levels been adjusted over the years they would be more than twice as high as they are now and fewer seniors would be taxed.
In addition to the higher premiums, middle-income seniors could eventually wind up spending big chunks, or even all, of their Social Security benefits just to pay for higher Medicare premiums. Once Means Tested, beneficiaries lose an enormously valuable protection of Social Security benefits. Under current law, when a person's income is below the Means Testing income threshold, Social Security benefits cannot be reduced when the Medicare premium increases more than your COLA does. The government adjusts the Medicare Part B premium so that net benefit check (after deduction for the premium) is not cut. This protection could prove its worth next year for millions.
But without any of President Bush's proposed changes, middle income seniors today could still wind up being Means Tested and pay the higher Medicare premiums if they have high capital gains from the sale of a home or large distribution from a retirement account. (To learn more see "The Hidden Cost of Selling Your Home.") TSCL opposes Means Testing and supports legislation that would repeal it.
Sources: "Medicare and Medicaid Savings In Bush's FY 2008 Budget," Kaiser Daily Health Policy Report, February 6, 2007. Letter to Senator Robert C. Byrd, from Peter Orszag, Director, Congressional Budget Office, March 2, 2007.
May 2007
