December 27, 2006 (Washington, DC) – An estimated 1.65 million seniors will be subject to higher Medicare Part B premiums in 2007 and for many, the higher cost will be due to a one-time increase in their income in 2005. The premium increase is due to Medicare means testing, which will begin being implemented for the first time on January 1, 2007.

As a  result, seniors who had an atypical increase to their income in 2005 – due to the sale of a  home or cashing in an IRA, for example – may not only have to pay taxes on that income, but will also be subject to higher Medicare Part B premiums, which cover doctors' visits, tests and outpatient hospital care. Some seniors could have to pay as much as 83 percent more for those services in 2007 than they did in 2006.

The Social Security Administration (SSA) is anticipating a flood of complaints following the implementation of these changes and is estimating that of the 1.65 million people affected, about 20 percent - or 377,000 - will have questions about means testing and the higher costs, and 10 percent of those will disagree with the decisions made and ask for a review.

Because means testing was not announced until 2006, seniors making financial decisions in 2005 were never given the time or opportunity to plan for their retirement in the context of the changing rules. That inability to plan will likely affect a large number of seniors in the years to come.

For example, one member of TREA Senior Citizens League living in Tennessee, who sold a second home in Indiana in 2005, has paid taxes on the proceeds from the sale. He now has been told that the capital gain that increased his adjusted gross income boosted his Part B premium from what would be $93.50 per month next year to $124.70 – an increase of more than one third.   

"We are concerned that our members are just now finding out that the government is suddenly increasing seniors' Part B premiums without adequate warning – particularly after they've already been taxed on that money and planned carefully for their retirement," said Shannon Benton, Executive Director of TREA Senior Citizens League. "Making matters worse, some seniors will have a difficult time with the appeal process, perhaps having to drive hours to appear in person – an option many seniors simply don't have available to them."

In October the Department of Health and Human Services (HHS) announced that for the first time since Medicare was created 41 years ago, the Part B premium would be "means tested," meaning seniors with incomes of $80,000 per year or higher will pay more for services than lower-income seniors. It also introduced a scale of premiums which goes up as income rises.

The federal government has set up a process of screening individual income tax returns each year before deciding on Part B premium charges - which will continue to impact more seniors in the future. For example, the cost to seniors in 2007 is based on information contained in income tax returns filed for 2005, which the Internal Revenue Service (IRS) shares with the SSA. And premium charges for 2008 will be based on income tax returns filed for 2006.

The government is phasing in the full cost of Means Tested Part B premiums over three years. A study by TREA Senior Citizens League is estimating that the cost of premiums will almost double within three years for people with incomes of $80,000 a year, from $88.50 a month today to an estimated $162.10 per month in 2009. For seniors with incomes of $200,000 a year or more, their premiums will more than quadruple from the current $88.50 to $372.60.

With 1.2 million members, TREA Senior Citizens League is one of the nation's largest nonpartisan seniors groups. Located just outside Washington, D.C., its mission is to promote and assist members and supporters, to educate and alert senior citizens about their rights and freedoms as U.S. Citizens, and to protect and defend the benefits senior citizens have earned and paid for. Please visit www.SeniorsLeague.org or call 1-800-333-8725 for more information

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Media Contact:

Tom Cooney, Phillips Media Relations
202-776-0640 (w); 571-247-1846 (c)   Tom@PhillipsMediaRelations.com

December 2006